Collapsing Exchange Rate Regimes: Another Linear Example

Robert Flood (), Peter Garber and Charles Kramer

No 5318, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In the literature on speculative attacks on a fixed exchange rate, it is usually assumed that the monetary authority responsible for fixing the exchange rate reacts passively to the monetary disruption caused by the attack. This assumption is grossly at odds with actual experience where monetary-base implications of the attacks are usually sterilized. Such sterilization renders the standard monetary-approach attack model unable to provide intellectual guidance to recent attack episodes. In this paper we describe the problems with the standard model and develop a version of the portfolio-balance exchange rate model that allows the study of episodes with sterilization. Sterilized attacks may be regarded as a laboratory test of the monetary versus portfolio-balance exchange rate models. The monetary model fails the test. These issues are motivated by reference to the December 1994 collapse of the Mexican peso.

JEL-codes: F30 F33 (search for similar items in EconPapers)
Date: 1995-10
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Flood, Robert P. & Garber, Peter M. & Kramer, Charles, 1996. "Collapsing exchange rate regimes: Another linear example," Journal of International Economics, Elsevier, vol. 41(3-4), pages 223-234, November.

Downloads: (external link)
http://www.nber.org/papers/w5318.pdf (application/pdf)

Related works:
Journal Article: Collapsing exchange rate regimes: Another linear example (1996)
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:5318

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5318

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 ().