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dc.contributor.authorMiller, J. Isaaceng
dc.description.abstractStandard target zone exchange rate models are based on nonlinear functions of an unobserved economic fundamental, which is assumed to be bounded, similarly to the target zone exchange rates themselves. A violation of this key assumption is a basic structural reason for model failure. Using a novel estimation and testing strategy, we show it is also a testable assumption. Our empirical results cast serious doubt on its validity in practice, providing a primitive reason for well-documented rejections of the basic model. Model failure from this violation is robust to otherwise ideal circumstances (e.g., perfect credibility).eng
dc.identifier.citationDepartment of Economics, 2009eng
dc.publisherDepartment of Economicseng
dc.relation.ispartofEconomics publicationseng
dc.relation.ispartofcommunityUniversity of Missouri-Columbia. College of Arts and Sciences. Department of Economicseng
dc.relation.ispartofseriesWorking papers (Department of Economics);WP 08-03eng
dc.rights.licenseThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License.
dc.subjecttarget zone exchange rateseng
dc.subjecteconomic fundamentaleng
dc.subjectunscented Kalman filtereng
dc.subjectrescaled range statisticeng
dc.subject.lcshForeign exchange -- Mathematical modelseng
dc.subject.lcshKalman filteringeng
dc.subject.lcshFinance -- Statisticseng
dc.titleTesting the Bounds: Empirical Behavior of Target Zone Fundamentalseng
dc.typeWorking Papereng

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