The paper reviews the recent literature on exchange rate target zones and on speculative attacks on fixed exchange rates. The influential Krugman model of exchange rate target zones has two main results, namely that credible target zones stabilize exchange rates more than fundamentals (the...

The paper reviews the recent literature on exchange rate target zones and on speculative attacks on fixed exchange rates. The influential Krugman model of exchange rate target zones has two main results, namely that credible target zones stabilize exchange rates more than fundamentals (the...

This chapter discusses the operation and collapse of fixed exchange rate regimes. It reports recent research contributions to the understanding of the dynamics of a fixed exchange rate system. These contributions can be placed readily into two categories research on target zones and research on...