First generation models of speculative attacks show that apparently random speculative attacks on policy regimes can be fully consistent with rational and well-informed speculative behavior. Unfortunately, models driven by a conflict between exchange rate policy and other macroeconomic...

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...

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...

This paper is a literature review of the current literature on currency “de-pegging”. The paper covers up-to-date literature on forces that drive countries to remove pegs. This paper covers mostly macroeconomic fundamentals of historic pegged currencies, and presents the most prominent...

The recent Asian currency crisis was caused by large prospective fiscal deficits associated with implicit bailout guarantees to failing banking systems. Absent the political will to raise taxes or cut spending, governments must resort to seignorage revenues to pay for the bailout of the banking...

This paper provides a critical analysis of Kaminsky and Reinhart (1999) (KR), perhaps the most prominent empirical paper on causes of currency crises. After dealing with problems present in this paper, it proposes an aggregate leading indicator of crisis. The proposed indicator performs better...

Confronted with a speculative attack on its currency peg, an authority weighs the short-term benefit of giving in and fine tuning the economy against the long-term benefit of credibility-enhancing resistance. In turn, speculators with heterogeneous beliefs face strategic uncertainty that peaks...

Applying basic statistical methods to a large sample of currency crises, it is shown that a variety of measures of monetary policy are significantly related to the outcome of a speculative attack. Unlike in the comparable study of Kraay (1999), discount rates have a significant but...

This paper argues that a principal cause of the 1997 Asian currency crisis was large prospective deficits associated with implicit bailout guarantees to failing banking systems. The expectation that these future deficits would be at least partially financed by seigniorage revenues or an...

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...