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...

Based on a framework originally developed by Morris and Shin (1995), this model shows how a currency crisis may be triggered by a lack of common knowledge regarding government type. Speculators receive noisy differential information concerning the value a government places on maintaining an...

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...

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...