Contagious speculative attacks

Stefan Gerlach () and Frank Smets

No 22, BIS Working Papers from Bank for International Settlements

Abstract: 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" collapse of a second parity. More importantly, even if the parity of the second currency is viable in the absence of a collapse of the first one, it might be subjected to a speculative attack if the reserves available to defend the parity are "small".

Pages: 26 pages
Date: 1994-09
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Citations: View citations in EconPapers (48)

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Related works:
Journal Article: Contagious speculative attacks (1995)
Working Paper: Contagious Speculative Attacks (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:22

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