Like a fixed exchange rate, a target zone system may be subject to
speculative attacks when the reserves of the central bank are limited. This
paper analyzes such speculative attacks and their implications; it shows that
the recently developed "smooth pasting" model of target zones should be
viewed as a special case that emerges only when reserves are sufficiently
large. The paper then uses the target zone framework to resolve a seeming
paradox in predicting speculative attacks on a gold standard, arguing that
such a standard may best be viewed as the boundary between one-sided target
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.