The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat...

Economic Recovery in the Euro Area has lost momentum in the second half of 2015. Due to dampening effects from the world economy and a marked increase in political uncertainty, a number of sentiment indicators also point downwards. Nevertheless, domestic demand increased rather strongly, while...

This thesis covers the further development of smooth transition regression models and their applications in finance. Smooth transition regression models are used to model nonlinearity of regime-switching type in empirical applications. Usually, smooth transition regression models are used with...