Published March 1, 2004
by Cambridge University Press .
Written in English
|The Physical Object|
This paper presents an empirical analysis of speculative attacks on pegged exchange rates in 22 countries between and We define speculative attacks or crises as large movements in exchange rates, interest rates, and international reserves. We develop stylized facts concerning the univariate behavior of a variety of macroeconomic variables, comparing crises with periods of tranquility. This paper presents an empirical analysis of speculative attacks on pegged exchange rates in 22 countries between and We define speculative attacks or crises as large movements in exchange rates, interest rates, and international reserves. Central bank undertakes a fixed rate of growth of domestic credit As long as s, is fixed, at Or under floating (s =), move m to the RHS to get an equation that determines the exchange rate: API - bernoonduang.coml = + 𝑦–λΔse. = m - 𝑦 + λΔse. 𝑑(𝑁𝐷𝐴) 𝑑 /NDA = 𝑑(𝑛𝑑𝑎) 𝑑 ≡ μ. => nda t = nda 0 + μ t. 𝑑(𝑅). Interest rates and non fully credible fixed exchange rates If expected probability (10%) of a devaluation (30%): Expected depreciation is 3% so r-r€= (E e–E)/E + 3% If the fixed exchange rate is not fully credible: interest rate of country that fixes at Ē must be higher to compensate for possible depreciation.
An Interest Rate Defense of a Fixed Exchange Rate? by Robert P. Flood and Olivier Jeanne IMF, Research Dept. Draft March Abstract Defending a government’s exchange-rate commitment with active interest rate policy is not an option in the well-known Krugman-Flood-Garber (KFG) model of speculative attacks. In. The Operation and Collapse of Fixed Exchange Rate Regimes Peter M. Garber, Lars E.O. Svensson. NBER Working Paper No. Issued in December NBER Program(s):International Finance and Macroeconomics Program The paper reviews the recent literature on exchange rate target zones and on speculative attacks on fixed exchange rates. Mar 19, · Speculation is most likely to occur in a semi-fixed exchange rate, where a government is committed to keeping the value of a currency at a particular level. For example, suppose the UK government wished to keep the value of the £ fixed at £1 = € Euros. Fixed exchange rate regime versus capital control. The belief that the fixed exchange rate regime brings with it stability is only partly true, since speculative attacks tend to target currencies with fixed exchange rate regimes, and in fact, the stability of the economic system is maintained mainly through capital control. A fixed exchange.