Abstract

For examining the logic of exchange rate regimes we analyze a political based approach in an interdependent macroeconomic framework. The stochastic exchange rate model yields an ordinary differential equation (ODE) with the interval limits as unknown parameters. This problem is solved numerically by a special method which merges the ODE solution process with the parameter identification. This method is fast and black box-like because it yields results to a prescribed precision in all cases considered.

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