Reverse Speculative Attacks

Manuel Amador, Javier Bianchi, Luigi Bocola and Fabrizio Perri

No 22298, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In January 2015, in the face of sustained capital inflows, the Swiss National Bank abandoned the floor for the Swiss Franc against the Euro, a decision which led to the appreciation of the Swiss Franc. The objective of this paper is to present a simple framework that helps to better understand the timing of this episode, which we label a "reverse speculative attack". We model a central bank which wishes to maintain a peg, and responds to increases in demand for domestic currency by expanding its balance sheet. In contrast to the classic speculative attacks, which are triggered by the depletion of foreign assets, reverse attacks are triggered by the concern of future balance sheet losses. Our key result is that the interaction between the desire to maintain the peg and the concern about future losses can lead the central bank to first accumulate a large amount of reserves, and then to abandon the peg, just as we have observed in the Swiss case.

JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-mon
Note: EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published as Manuel Amador & Javier Bianchi & Luigi Bocola & Fabrizio Perri, 2016. "Reverse speculative attacks," Journal of Economic Dynamics and Control, .

Downloads: (external link)
http://www.nber.org/papers/w22298.pdf (application/pdf)

Related works:
Journal Article: Reverse speculative attacks (2016)
Working Paper: Reverse Speculative Attacks (2016)
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:nbr:nberwo:22298

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22298

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().