NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Linkage Between Speculative Attack and Target Zone Models of Exchange Rates

Robert P. Flood, Peter M. Garber

NBER Working Paper No. 2918
Issued in April 1989
NBER Program(s):   ITI   IFM

In this paper we generalize the target zone exchange rate as model formalized by Krugman (1988b) to include finite-sized interventions in defense of the zone. The main contributions of these pages consist of linking the recent developments in the theory of target zones to the mirror-image theory of speculative attacks on asset price fixing regimes and in using aspects of that linkage to give an intuitive interpretation to the smooth pasting" condition usually invoked as a terminal condition.

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Document Object Identifier (DOI): 10.3386/w2918

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