Time series evidence on exchange rates has been unable to reject the random walk hypothesis. A simple structural model that accounts for target zone nonlinearities provides conclusive evidence of mean reversion in EMS exchange rates.

Krugman (1991)'s target zone model has become the reference of a large part of this literature. Despite its simplicity and elegance, empirical evidence has been lacking. Deriving from Krugman's model analytical expressions for the conditional volatility and density distribution close to the...

We study the performance of the euro/Swiss franc exchange rate in the extraordinary period from September 6, 2011 and January 15, 2015 when the Swiss National Bank enforced a minimum exchange rate of 1.20 Swiss francs per euro. Within the general framework built on geometric Brownian motions...