Coping with the speculative attack against the forint's band

Gyula Barabás (barabasgy@mnb.hu), Csaba Balogh (baloghcs@mnb.hu), Tamás Czeti (czetit@mnb.hu), Szilárd Erhart, Zsolt Érsek (ersekzs@mnb.hu), András Kármán (karmana@mnb.hu), Gergely Kóczán and Róbert Rékási (rekasir@mnb.hu)
Additional contact information
Gyula Barabás: Magyar Nemzeti Bank
Csaba Balogh: Magyar Nemzeti Bank
Tamás Czeti: Magyar Nemzeti Bank
Zsolt Érsek: Magyar Nemzeti Bank
András Kármán: Magyar Nemzeti Bank
Gergely Kóczán: Magyar Nemzeti Bank
Róbert Rékási: Magyar Nemzeti Bank

No 2003/3, MNB Background Studies (discontinued) from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: On 15 and 16 January 2003, an intensive speculative attack was launched against the exchange rate band of the forint. This study analyses the monetary policy decisions with regard to the antecedents of the speculation, the events of the speculative episode and the subsequent period of consolidation. The study finds that the speculative attack was irrational and unjustified in view of several considerations. Through adjustments in the policy rate and the modification of monetary instruments, the MNB was able to defend the exchange rate band of the forint. The MNB successfully localized the effects of the speculative attack on the interbank market. The MNB’s presence on the foreign exchange market facilitated the rapid and controlled withdrawal of the speculative capital, without threatening the disinflation process and the stability of the financial system. The investors taking part in the speculation incurred substantial losses, while the market developments after the speculative episode increased the banking system’s profit.

Keywords: financial markets; speculative attack; exchange rate; speculative episode. (search for similar items in EconPapers)
JEL-codes: E44 E52 E65 G18 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2003
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:backgr:2003/3

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