Speculative Attacks and Models of Balance of Payments Crises

Speculative Attacks and Models of Balance of Payments Crises PDF

Author: Mr.Robert P. Flood

Publisher: International Monetary Fund

Published: 1991-10-01

Total Pages: 64

ISBN-13: 1451852185

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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.

Speculative Attacks and Models of Balance-of-Payments Crises

Speculative Attacks and Models of Balance-of-Payments Crises PDF

Author: Pierre-Richard Agenor

Publisher:

Published: 2006

Total Pages: 64

ISBN-13:

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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.

Speculative Attacks

Speculative Attacks PDF

Author: Mr.Guillermo Calvo

Publisher: International Monetary Fund

Published: 1991-01-01

Total Pages: 7

ISBN-13: 1451926510

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A brief survey of the literature on speculative attacks is provided. The nature and causes of balance-of-payments crises, the implications for the behavior of the current account and the real exchange rate are discussed. Also, potential areas for future research on balance-of-payments crises are suggested.

Speculative Attacks and Currency Crises

Speculative Attacks and Currency Crises PDF

Author: Ms.Inci Ötker

Publisher: International Monetary Fund

Published: 1995-11-01

Total Pages: 38

ISBN-13: 1451853548

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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.

Perspectiveson the Recent Currency Crisis Literature

Perspectiveson the Recent Currency Crisis Literature PDF

Author: Mr.Robert P. Flood

Publisher: International Monetary Fund

Published: 1998-09-01

Total Pages: 52

ISBN-13: 1451855168

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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.

Anticipating Balance of Payments Crises--The Role of Early Warning Systems

Anticipating Balance of Payments Crises--The Role of Early Warning Systems PDF

Author: Mr.Eduardo Borensztein

Publisher: International Monetary Fund

Published: 2000-01-24

Total Pages: 44

ISBN-13: 9781557758286

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Recent years have witnessed an increase in the frequency of currency and balance of payments crises in developing countries. More important, the crises have become more virulent, have caused widespread disruption to other developing countries, and have even had repercussions on advanced economies. To predict crises, their causes must be clearly understood. Two competing strands of theories are reviewed in this paper. The first focuses on the consequences of such policies as excessive credit growth in provoking depletion of foreign exchange reserves and making a devaluation enevitable. The second emphasizes the trade-offs between internal and external balance that the policymaker faces in defending a peg.

Rational and Self-Fulfilling Balance-of-Payments Crises

Rational and Self-Fulfilling Balance-of-Payments Crises PDF

Author: Maurice Obstfeld

Publisher:

Published: 1986

Total Pages:

ISBN-13:

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The recent balance-of-payments literature shows that-speculative attacks on a pegged exchange rate must sometimes-occur if the path of the rate is riot to offer abnormal profit opportunities. Such attacks are fully rational, as they reflect the market's response to a regime breakdown that is inevitable.This paper shows that, given certain expectations about policy, balance-of-payments crises can also be purely self-fulfilling events. In such cases even a permanently viable regime maybreak down, and the economy will possess multiple equilibria corresponding to different subjective assessments of the probability of collapse. The behavior of domestic interest rates and foreign reserves will naturally reflect the possibility of a speculative attack. Work on foreign-exchange crises derives from the natural-resource literature initiated by Salant and Henderson (1978), where the definition of "abnormal" profit opportunities is straightforward. Because the definition is not always straight-forward in a monetary context, this paper also shows how crises occur in a discrete-time stochastic monetary model when an eventual breakdown is inevitable

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