The stability of the EMS depends crucially on the realignment expectations of market participants. In this paper we discuss how to measure such expectations and how to relate them to economic fundamentals, central bank reputation, and the institutional arrangements of the EMS. We find the...

A salient feature of recent currency speculations in the European Exchange Rate Mechanism is that the speculators can be big strategic players in the market, along with the central bank. This paper develops a game-theoretic model that captures this feature of the speculative market. For a regime...

In our model, information-producing agents can opt to produce from the sell-side, in which case they can only sell their information to other market participants, or produce from the buy-side, in which case they agent can trade in the financial market. If sell-side information substitutes for...