Based on the Krugman (1991) model, the aim of this study is to analyse whether the adoption by Portugal of an exchange rate target zone regime in the context of the participation of the Portuguese escudo in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS), allowed the...

The aim of this study is to assess to what extent the Portuguese participation in the European Monetary System has been characterized by mean reverting behaviour, as predicted by the exchange rate target zone model developed by Krugman (1991). Although exchange rate mean reversion is widely...