The article presents a model that shows how a country's central bank can use interventions to control inflation in a target exchange rate zone. The researchers found that within the target zone, the central bank can adjust prices to foreign shocks, but near the edge of the zone, interventions are needed to prevent the exchange rate from going beyond the set limits. The model suggests that with effective interventions, the exchange rate can stabilize over time, protecting the economy from external price fluctuations. Empirical tests support the model's predictions, indicating that central bank actions can help maintain price stability in a target exchange rate regime.