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Speculative Attacks and Currency Crises
Author: Ms.Inci Ötker
Publisher: International Monetary Fund
Published: 1995-11-01
Total Pages: 38
ISBN-13: 1451853548
DOWNLOAD EBOOK →This paper estimates a speculative attack model of currency crises in order to identify the role of economic fundamentals and any early warning signals of a potential currency crisis. The data from the Mexican economy was used to illustrate the model. Based on the results, a deterioration in fundamentals appears to have generated high one-step-ahead probabilities for the regime changes during the sample period 1982-1994. Particularly, increases in inflation differentials, appreciations of the real exchange rate, foreign reserve losses, expansionary monetary and fiscal policies, and increases in the share of short-term foreign currency debt appear to have contributed to the market pressures and regime changes in that period.
Exchange Restrictions and Devaluation Crises
Author: Pierre-Richard Agénor
Publisher: International Monetary Fund
Published: 1990-09
Total Pages: 44
ISBN-13:
DOWNLOAD EBOOK →This paper develops a model of devaluation crises for an economy where foreign exchange restrictions lead to the emergence of a parallel market. The devaluation rule relates the size of the parity change to the spread between the official and parallel exchange rates. The mechanism that triggers the devaluation relates credit policy and the inflation tax. A credit expansion leads to an increase in the spread and possibly to a fall in inflation tax revenue, as agents switch away from domestic currency holdings. A devaluation reverses temporarily the process of erosion of the tax base if the associated fall in the premium raises the credibility of the new parity.
Perspectiveson the Recent Currency Crisis Literature
Author: Mr.Robert P. Flood
Publisher: International Monetary Fund
Published: 1998-09-01
Total Pages: 52
ISBN-13: 1451855168
DOWNLOAD EBOOK →In the 1990s, currency crises in Europe, Mexico, and Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates and have prompted researchers to undertake new theoretical and empirical analysis of these events. This paper provides some perspective on this work and relates it to earlier research. It derives the optimal commitment to a fixed exchange rate and proposes a common framework for analyzing currency crises. This framework stresses the important role of speculators and recognizes that the government’s commitment to a fixed exchange rate is constrained by other policy goals. The final section finds that some crises may be particularly difficult to predict using currently popular methods.
Self-Fulfilling Risk Predictions
Author: Mr.Robert P. Flood
Publisher: International Monetary Fund
Published: 1998-08-01
Total Pages: 35
ISBN-13: 1451854692
DOWNLOAD EBOOK →The paper shows that changing market beliefs about currency risk can generate a self-fulfilling speculative attack on a fixed exchange rate. The attack does not require a later change in policies to make it profitable. This is illustrated by introducing an endogenous risk premium into a “first-generation model” of a speculative attack. The model is further modified to take account of sterilization, debt-financed fiscal deficits, and anticipatory price-setting behavior. The model is used to interpret the 1994 Mexican peso crisis.
Speculative Attacks and Models of Balance of Payments Crises
Author: Mr.Robert P. Flood
Publisher: International Monetary Fund
Published: 1991-10-01
Total Pages: 64
ISBN-13: 1451852185
DOWNLOAD EBOOK →This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, such as: alternative post-collapse regimes, uncertainty, real sector effects, external borrowing and capital controls, imperfect asset substitutability, sticky prices, and endogenous policy switches. Empirical evidence on the collapse of exchange rate regimes is also examined, and the major implications of the analysis for macroeconomic policy discussed.
Policy Making and Speculative Attacks in Models of Exchange Rate Crises
Speculative Bubbles, Speculative Attacks, and Policy Switching
Author: Robert P. Flood
Publisher: MIT Press
Published: 1994
Total Pages: 528
ISBN-13: 9780262061698
DOWNLOAD EBOOK →The papers in this book are grouped into three sections: the first on price bubbles is primarily financial; the second on speculative attacks (on exchange rate regimes) is international in scope; and the third, on policy switching, is concerned with monetary policy.
Soft Exchange Rate Bands and Speculative Attacks
Author: Mr.Alessandro Prati
Publisher: International Monetary Fund
Published: 1998-11-01
Total Pages: 30
ISBN-13: 1451857373
DOWNLOAD EBOOK →We present a model of a “soft” exchange rate target zone and interpret it as a stylized description of the post-August 1993 ERM. Our central bank targets a moving average of the current and past exchange rates, rather than the exchange rate’s current level, thus allowing the rate to move within wide margins in the short run, but within narrow margins in the long run. For realistic parameters, soft target zones are significantly less vulnerable to speculative attacks than “hard” target zones. These predictions are consistent with the ERM’s experience and the abatement of speculative pressure in European markets since the bands’ widening in 1993.
Currency Speculation in Fixed Exchange Rate Regimes
Author: Anja Zenker
Publisher: Springer Science & Business Media
Published: 2014-01-08
Total Pages: 142
ISBN-13: 3658048298
DOWNLOAD EBOOK →Speculative currency crises seem to have become a common and inevitable phenomenon in the international monetary system. Against this background, various approaches have been developed by economists to cover the broad range of situations in which balance-of-payments crises occurred. Anja Zenker provides a comprehensive insight into the body of theoretical and empirical literature about currency speculation in fixed exchange rate regimes. The author discusses different generations of theoretical models and their empirical relevance in recent currency crises. Moreover, she considers diverse policy options which attempt to avoid speculative attacks on exchange rate pegs.
