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.