Contagious Speculative Attacks

Stefan Gerlach () and Frank Smets

No 1055, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: During the European exchange market turmoil in 1992-3 it was evident that speculative attacks tended to spread across currencies. Using a two-country 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 important, 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'.

Keywords: Exchange Rate Contagion; Speculative Attacks (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 1994-11
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Citations: View citations in EconPapers (48)

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Journal Article: Contagious speculative attacks (1995)
Working Paper: Contagious speculative attacks (1994)
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