TARGET ZONE MODELS WITH PRICE INERTIA - SOLUTIONS AND TESTABLE IMPLICATIONS

Authors
Citation
A. Sutherland, TARGET ZONE MODELS WITH PRICE INERTIA - SOLUTIONS AND TESTABLE IMPLICATIONS, Economic journal, 104(422), 1994, pp. 96-112
Citations number
16
Categorie Soggetti
Economics
Journal title
ISSN journal
00130133
Volume
104
Issue
422
Year of publication
1994
Pages
96 - 112
Database
ISI
SICI code
0013-0133(1994)104:422<96:TZMWPI>2.0.ZU;2-Y
Abstract
Many recent papers suggest that the basic flex-price target zone model does not perform well empirically. This paper investigates the testab le implications of a sticky-price target zone model and finds that, to a limited extent, it has a better empirical performance than the simp lest flex-price model. However (in terms of nominal variables) the sti cky-price model is found to be observationally equivalent to the flex- price model when the latter is extended to include intra-marginal inte rvention and realignments.