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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
On the sustainability of exchange rate target zones with central parity realignments
Enrique Martinez-Garcia
Abstract

I show that parity realignments alone do not suffice to ensure the long-run sustainability of an exchange rate target zone with imperfect credibility due to the gambler’s ruin problem. However, low credibility and frequent realignments can destabilize the exchange rate.


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Enrique Martinez-Garcia, On the sustainability of exchange rate target zones with central parity realignments, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 243, 01 Jun 2015.
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Note: Published as: Martínez-García, Enrique (2015), "On the Sustainability of Exchange Rate Target Zones with Central Parity Realignments," Economics Letters 134: 86-89.
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DOI: 10.24149/gwp243
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