Many monetary and fiscal policy decision makers and economists hold the view that exchange rates are volatile even though nominal exchange rates vary less than many other financial market prices and yields. This paper seeks an explanation for this puzzle by contrasting exchange rate dynamics in...

The Swedish exchange rate band is studied using daily data on exchange rates and interest rate differentials for the 1980s. Applying a number of different statistical and econometrics techniques it is found that the first generation of target zone models cannot provide an adequate explanation of...