The note focuses on the speculative attack on domestic assets, which can occur irrespective of country's fiscal situation, suggesting political economy considerations may be the reason. However, recent events have reopened the debate on how to reduce vulnerability to capital outflows in...

During the European exchange market turmoil in 1992-93 it was evident that speculative attacks tended to spread across currencies. Using a twocountry version of the model developed by Flood and Garber (1984) we show how a speculative attack against one currency may accelerate the warranted...

We develop a framework for studying the choice of exchange rate regime in an open economy where the local currency is vulnerable to speculative attacks. The optimal regime is determined by a policymaker who trades off the loss from nominal exchange rate uncertainty, against the cost of...

The effects of a currency crisis on a country's economy depend on non-linear relations among several variables that characterize the economic, financial, legal, and socio-political structure of the country at the onset of the crisis. Those effects can be associated with contractions or...

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...