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The Forward Exchange Market, Speculation, and Exchange Market Intervention
Eaton, Jonathan; Turnovsky, Stephen J. - 2021
This paper develops a stochastic equilibrium model of an open economy incorporating speculation in the forward exchange … market. The model is used to examine two issues. The first is the role of speculation in stabilizing the economy against … stochastic disturbances. Much risk averse speculation stabilizes domestic income against disturbances in the domestic bond market …
Persistent link: https://www.econbiz.de/10013247678
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Models of Currency Crises with Self-Fulfilling Features
Obstfeld, Maurice - 2000
The discomfort a government suffers from speculation against its currency determines the strategic incentives of …
Persistent link: https://www.econbiz.de/10014158713
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Speculative Attacks on Pegged Exchange Rates : An Empirical Exploration with Special Reference to the European Monetary System
Eichengreen, Barry; Rose, Andrew Kenan; Wyplosz, Charles - 2021
This paper presents an empirical analysis of speculative attacks on pegged exchange rates in 22 countries between 1967 and 1992. We define speculative attacks or crises as large movements in exchange rates, interest rates, and international reserves. We develop stylized facts concerning the...
Persistent link: https://www.econbiz.de/10013227044
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Competitiveness, Realignment, and Speculation : the Role of Financial Markets
Obstfeld, Maurice - 2021
factors behind domestic inflation. Under a policy regime in which domestic inflation automatically triggers devaluation, the … economy can undergo self-fulfilling depreciation-inflation spirals, triggered by speculative attack on the exchange rate. Such … spirals do not occur when realignments do not offset past inflation fully. The second set of results shows how an exchange …
Persistent link: https://www.econbiz.de/10013311848
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Rational Speculative Bubbles in an Exchange Rate Target Zone
Buiter, Willem H.; Pesenti, Paolo A. - 2021
The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency bard are …
Persistent link: https://www.econbiz.de/10013222244
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Target Zones with Limited Reserves
Krugman, Paul R. - 2008
Like a fixed exchange rate, a target zone system may be subject to speculative attacks when the reserves of the central bank are limited. Thispaper analyzes such speculative attacks and their implications; it shows that the recently developed quot;smooth pastingquot; model of target zones should...
Persistent link: https://www.econbiz.de/10012774869
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The Logic of Currency Crises
Obstfeld, Maurice - 2021
Once one recognizes that governments borrow international reserves and exercise other policy options to defend fixed exchange rates during currency crises, the question arises: What factors determine a government's decision to abandon a currency peg or hang on? In a setting of purposeful action...
Persistent link: https://www.econbiz.de/10013213429
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Contagious Currency Crises
Eichengreen, Barry; Rose, Andrew Kenan; Wyplosz, Charles - 2010
This paper is concerned with the fact that the incidence of speculative attacks tends to be temporally correlated; that is, currency crises appear to pass contagiously from one country to another. The paper provides a survey of the theoretical literature, and analyzes the contagious nature of...
Persistent link: https://www.econbiz.de/10014076135
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The Micro-Macro Disconnect of Purchasing Power Parity
Bergin, Paul R. - 2010
This paper reconciles the persistence of aggregate real exchange rates with the faster adjustment of international relative prices in microeconomic data. Panel estimation of an error correction model using a micro data set uncovers new stylized facts regarding this puzzle. First, adjustment to...
Persistent link: https://www.econbiz.de/10013149574
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Peso Problems and Heterogeneous Trading : Evidence from Excess Returns in Foreign Exchange and Euromarkets
Lewis, Karen K. - 2021
Theoretical and empirical studies have treated excess returns as processes with time-varying but temporary disturbances. By contrast, empirical evidence indicates that the behavior of asset price levels can be well-approximated by processes with some permanent disturbances. These two...
Persistent link: https://www.econbiz.de/10013311881