Speculation and the Decision to Abandon a Fixed Exchange Rate Regime

Ivan Pastine

No 2893, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper demonstrates that the implications of first-generation speculative attack models do not hold if there is a rational, forward-looking policy maker. The policy maker will be able to avoid predictable speculative attacks by introducing uncertainty into the decisions of speculators. This changes the sudden attack into a prolonged period of increasing speculation and uncertainty. In addition, the model provides useful insights into the viability of temporary nominal anchor policies, and a theoretical foundation for a useful empirical methodology.

Keywords: Nominal anchor; Optimizing bop crises; Speculative attacks (search for similar items in EconPapers)
JEL-codes: E58 F31 (search for similar items in EconPapers)
Date: 2001-07
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Citations: View citations in EconPapers (2)

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Journal Article: Speculation and the decision to abandon a fixed exchange rate regime (2002)
Working Paper: Speculation and the Decision to Abandon a Fixed Exchange Rate Regime (2000)
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