A Model of the Currency Crisis of 1992: the Case of the British Pound and the Italian Lira

A. Mongiardino

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: The purpose of this paper is to develop a theoretical model of the attack on the Italian Lira and the British Pound and the subsequent exit of these currencies from the ERM in September 1992. One element that has been crucial in the formulation of agents' expectations of future exchange rates, and hence the sustainability of the system, has been the degree of willingness of the Bundesbank to intervene and support the weak currencies of the System. The model will focus on this aspect and will provide a framework where the agents' uncertainty about the stance of the Bundesbank towards the 'weak' currencies of the System is reflected in increasingly high interest rate differentials between the 'weak' countries and Germany.

Keywords: EXCHANGE RATE; CURRENCIES (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1996
References: Add references at CitEc
Citations:

Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/w ... 95-1998/twerp463.pdf

Related works:
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:wrk:warwec:463

Access Statistics for this paper

More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().