Devaluation expectations and speculative attacks on the currency

Alpo Willman

No 8/1988, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In this paper balance-of-payments crises are studied in a framework in which investors do not know the threshol~ level of foreign reserves, the attainment of which implies that the central bank abandons its fixed exchange target. Investors are alternatively risk neutral or risk averters. It is shown that, depending on whether the threshold level is stochastic or fixed but unknown to investors, currency speculation reveals itself as, respectively, a speculative outflow distributed over a longer time period or a sudden speculative attack on the currency.

Date: 1988
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/211511/1/bof-rdp1988-008.pdf (application/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:zbw:bofrdp:rdp1988_008

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().