Publication

In this paper, the authors analyze the Danish krone (DKK)/euro (EUR) exchange rate between 1999 and 2011. They argue that most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model confirms that the exchange rate exhibits target zone dynamics consistent with a band of approximately 0.75 percent around its unconditional mean. The authors therefore conclude that the Danmark Nationalbank intervention policy of intra-marginal operations successfully managed an informal target zone in the foreign exchange market.