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In the wake of recent contributions, a nonlinear adjustment to purchasing power parity is explored over the real exchange rates of two key European currencies with respect to the German Mark: the Italian Lira and the French Franc. The periods considered in the estimation range from the demise of...
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The authors estimate a target zone model for three ERM exchange rates for 1983-86 and 1987-91 by the method of simulated moments, taking account of the continuous time specification by using daily data with the interruptions of holidays and weekends. Specification tests are unable to reject the...
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