Speculative Attacks and the Dynamics of Exchange Rates

Stephen J Turnovsky and Jian Xu
Additional contact information
Jian Xu: Kenyon College

Annals of Economics and Finance, 2002, vol. 3, issue 2, 219-248

Abstract: This paper examines the issue of speculative attacks on the exchange rate in an economy in which. following the attack the government allows the exchange rate to float for a limited period, before repegging it at a higher, sustainable, level. We highlight the tradeoffs between the length of the floating rate period and the timing of the speculative attack, and the implied consequences for the time paths of the exchange rate and consumption. By letting the exchange rate float for an appropriate period, the exchange rate crisis can be delayed for a maximum period of time, although delaying the crisis as long as possible is non-optimal. In some respects our results are qualitatively similar to earlier results based on non-optimizing models, although employing a rational intertemporal optimizing framework substantially enhances our understanding of the determinants of the crises.

Keywords: Speculative attacks; Exchange rates; Dynamcics (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://aeconf.com/Articles/Nov2002/aef030201.pdf (application/pdf)
http://down.aefweb.net/AefArticles/aef030201.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2002:v:3:i:2:p:219-248

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().