Speculative attacks and models of balance-of-payments crises

by Pierre-Richard AgГ©nor

Publisher: National Bureau of Economic Research in Cambridge, MA

Written in English
Published: Pages: 61 Downloads: 899
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Subjects:

  • Balance of payments -- Econometric models.,
  • Foreign exchange rates -- Econometric models.

Edition Notes

StatementPierre-Richard Agénor, Jagdeep S. Bhandari, Robert P. Flood.
SeriesNBER working papers series -- working paper no. 3919, Working paper series (National Bureau of Economic Research) -- working paper no. 3919.
ContributionsBhandari, Jagdeep S., Flood, Robert P., National Bureau of Economic Research.
The Physical Object
Pagination61, [7] p. :
Number of Pages61
ID Numbers
Open LibraryOL22438970M

This paper estimates a speculative attack model of currency crises in an attempt to identify the roles of macroeconomic fundamentals and speculative market pressures in the recent crisis, as well. Recent developments in the theoretical and empirical analysis of balance of payments crises are reviewed. A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, including alternative postcollapse regimes, uncertainty, real sector effects, external borrowing and capital controls.   However, note that neither our formal model nor our discussion in the text depends on this assumption. See Claes- sens () for a discussion of this issue. Balance of Payments Crises and Fiscal Adjustment Measures ~ te foreign assets eserves i, i 0 T Figure 1. Balance of Payments Crisis total foreign assets of the economy ~--time in reality. Indeed, we can show that in the TZ context speculative attack-like interventions may occur as a result of a policy to defend the zone. 5 Thus, Krugman’s recent (, ) work is actually a step toward coming full circle on his () contribution on balance of payments crises. We derive our results in the two remaining sections.

Downloadable (with restrictions)! The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency-market equilibria. After describing an illustrative model in which high unemployment may cause an exchange rate crisis with self-fulfilling features, the paper reviews some other self-reinforcing.   Journals & Books; Help A. VelascoFinancial crises and balance of payments crises: a simple model of the southern cone experience. J. Devel. Econ, 27 (), pp. Google Scholar ☆ This paper was previously circulated under the title “On the Fundamentals of Self-Fulfilling Speculative Attacks.” We gratefully acknowledge grants. In the continuous-time limit of discrete-time models there is a single attack timed so as to rule out an anticipated discrete jump in the exchange e-of-payments models differ from. Krugman P. [] “ A Model of Balance of Payments Crises ” Journal of Money, Credit and Banking 11(3): – Crossref, Google Scholar Krugman P. [ ] “ Target Zones and Exchange Rate Dynamics ” The Quarterly Journal of Economics (3): –

to balance-of-payments crises, the macroeconomic “stylized facts” that characterize for a variety of models of balance-of-payments crises; and Eichengreen, Rose, andWYP OSZ () for a1 crises and speculative attacks, along the lines ofEichengreen, Rose, and Wyplosz () and Frankel and Rose (). The aim there is to assess.   Although such crises-the Latin American debt crisis of the s, the speculations on European currencies in the early s, and the ensuing Mexican, South American, and Asian crises-have played a central role in world affairs and continue to occur at an alarming rate, many questions about their causes and effects remain to be answered. Krugman, Paul. “A Model of Balance of Payments Crises.” Journal of Money, Credit and Bank pp. Moreno, Ramon. “Macroeconomic Behavior During Periods of Speculative Pressure or Realignment: Evidence from Pacific Basin Economies.” FRBSF Economic Review , No. 3. Obstfeld, Maurice. “The Logic of.

Speculative attacks and models of balance-of-payments crises by Pierre-Richard AgГ©nor Download PDF EPUB FB2

Speculative Attacks and Models of Balance-of-Payments Crises Pierre-Richard Agenor, Jagdeep S. Bhandari, Robert P. Flood. NBER Working Paper No.

Issued in November NBER Program(s):International Trade and Investment, International Finance and Macroeconomics This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. Get this from a library. Speculative attacks and models of balance-of-payments crises.

[Pierre-Richard Agénor; Jagdeep S Bhandari; Robert P Flood; International Monetary Fund. Research Department.] -- This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises.

A simple analytical model highlighting the process leading to such crises. Additional Physical Format: Online version: Agénor, Pierre-Richard.

Speculative attacks and models of balance-of-payments crises. Cambridge, MA: National Bureau of Economic Research, []. Speculative Attacks and Models of Balance of Payments Crises PIERRE-RICHARD AGENOR, JAGDEEP S. BHANDARI, and ROBERT P. FLOOD* Recent developments in the theoretical and empirical analysis of balance ofpayments crises are reviewed.

A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is. Downloadable. Author(s): Pierre-Richard Agenor & Jagdeep S.

Bhandari & Robert P. Flood. Abstract: This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. A simple analytical model highlighting the process leading to such crises is first developed.

The basic framework is then extended to deal with a variety of issues, such as. Downloadable. This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises.

A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, such as: alternative post-collapse regimes, uncertainty, real sector effects, external borrowing and.

This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, such as: alternative post-collapse regimes, uncertainty, real sector effects, external borrowing and capital.

balance-of-payments crises. A speculative attack on a government's reserves can be viewed as a process by which investors change the composition of their portfolios, reducing the proportion of domestic currency and raising the proportion of foreign currency.

This change in composition is then justified by a change in relative yields. balance of payments crisis model related to Calvo (). The model includes both tradable and nontradable goods, which allows a natural specification of the CPI. Extensions to second generation speculative attacks are possible.

As discussed in Krugman (), these also require a commitment to intervene in the foreign exchange. In economics, a speculative attack is a precipitous selling of untrustworthy assets by previously inactive speculators and the corresponding acquisition of some valuable assets (currencies, gold, emission permits, commodities, remaining quotas).The first model of a speculative attack was contained in a discussion paper on the gold market by Stephen Salant and Dale Henderson at the Federal.

Get this from a library. Speculative Attacks and Models of Balance-of-Payments Crises. [Robert P Flood; Pierre-Richard Agenor; Jagdeep S Bhandari; National Bureau of Economic Research.;] -- This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises.

A simple analytical model highlighting the process leading to such crises is first. “Speculative Attacks and Models of Balance of Payments Crises,” IMF Staff Pap No. 2, – CrossRef Google Scholar Blackburn, K. and M. Sola. Balance-of-Payments Crises and Devaluation Maurice Obstfeld.

NBER Working Paper No. (Also Reprint No. r) Issued in April NBER Program(s):International Trade and Investment, International Finance and Macroeconomics The collapse of a fixed exchange rate is typically marked by a sudden balance-of-payments crisis in which"speculators" fleeing from the domestic currency.

By using data from the Mexican economy, this paper estimates a speculative attack model of currency crises in order to identify the role of macroeconomic fundamentals and early warning signals of. A currency crisis is a situation in which serious doubt exists as to whether a country's central bank has sufficient foreign exchange reserves to maintain the country's fixed exchange crisis is often accompanied by a speculative attack in the foreign exchange market.

A currency crisis results from chronic balance of payments deficits, and thus is also called a balance of payments crisis. 1 A currency crisis usually refers to a situation in which speculative attacks force a sharp devaluation. A balance of payments crisis is a broader concept that involves a shortage of reserves to cover balance of payments needs.

This paper focuses on balance of payments crises as well as currency crises. Get this from a library. Speculative Attacks and Models of Balance of Payments Crises.

[Robert P Flood; Pierre-Richard Agénor; Jagdeep S Bhandari; International Monetary Fund.] -- This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises.

A simple analytical model highlighting the process leading to such crises is first. A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value.

In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of. SPECULATIVE ATTACKS reserves dipped down to dangerously low levels.

It has been suggested that because Chinese residents cannot hold foreign currency, private speculative attacks cannot be the cause for China’s balance of payments crises. How-ever, this argument is not necessarily valid.

Since the early s, firms. Speculative Attacks: Fundamentals and Self-Fulfilling Prophecies Robert P. Flood, Nancy P. Marion. NBER Working Paper No.

Issued in October NBER Program(s):International Finance and Macroeconomics We develop a modified understand better the Mexican peso crisis as well as aspects of the European currency crises in A Model of Balance-of-Payments Crises INTRODUCTION A GOVERNMENT CAN PEG the exchange value of its currency in a variety of ways.

In a country with highly developed financial markets it can use balance-of-payments crises. A speculative attack on a government's reserves can be. Economics Letters 25 () 75 North-Holland SPECULATIVE ATTACKS ON THE CURRENCY WITH UNCERTAIN MONETARY POLICY REACTIONS Alpo WILLMAN Bank of Finland, SF/01 Helsinki, Finland Received 22 May Accepted 24 July We show that balance-of-payments crises are accompanied by discrete shifts in the exchange rate if in the pre-crisis situation.

The basic model highlights a fundamental element driving the speculative attack: the anticipation of future government policies. As a result of this anticipation, the balance-of-payments crisis may occur even when the level of reserves appears sufficiently large to handle normal balance of payments.

tequila crisis, or the East Asian economies after the crises ofor Argentina after the collapse of convertibility in In all these cases the collapse of a fixed rate under speculative attack was followed by a severe contraction in the real economy.

Hence the development of third-generation models. These models – e.g. Krugman (). speculative attacks can stimulate currency crises. According to the important of this issue, new model of currency crisis introduced based on Neo-Keynesian framework in Iranian economy.

Also, the stock of foreign assets that held domestically is estimated using money demand equation with ratchet mirrors. EUROPEAN ECONOMIC REVIEW ELSEVIER European Economic Review 41 () Speculative attacks and macroeconomic fundamentals: evidence from some European currencies tnci Otker *, Ceyla Pazarbaoglu International Monetary Fund, 19th Street, N.W., Washington, DCUSA Abstract This paper evaluates the role of macroeconomic fundamentals in generating episodes of speculative.

The series of crises initially started with speculative attacks on the Thai baht which, in Julyforced the authorities to abandon the fixed exchange rate system versus the US dollar. The crisis soon spread to other countries of the region and seriously afflicted.

In these models, speculative attacks are the response to the depletion of resources in fixed-price environments: A shrinking stock of natural resources at fixed prices in the Hotelling-Salant-Henderson model (see Obstfeld, ; Salant and Henderson, ) or declining reserves in fixed exchange rate systems (see Krugman, ) are typical.

A speculative attack on a currency occurs when 'investors' believe that the value of a currency is over-valued and therefore, they sell that currency in anticipation of it falling and buy another currency (e.g.

sell their holdings of Pound Sterling and buy Euros). They make money by seeing the value of the currency they buy (e.g. Euros) increase. "Speculative Attacks and Models of Balance-of-Payments Crises," NBER Working PapersNational Bureau of Economic Research, Inc. Blanco, Herminio & Garber, Peter M, "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol.

94(1), pagesFebruary. The book Currency Crises, this offering from the NBER will serve as a useful basis for further debate on the theory and practice of speculative attacks, as well as a valuable resource as new crises loom. Table of Contents. Balance-of-Payments Crises in Emerging Markets: Large Capital Inflows and Sovereign Governments.Balance of Payments Crises episode is usually referred to as a speculative attack on reserves.

So, what is the size of the speculative attack? It is given by R T = m T m T In the context of our perfect foresight model, the speculative attack must happen on the precise date at which a run will wipe out all remaining reserves. Moreover, on.-- The news approach to exchange rate modeling.

-- Empirical studies of the news approach. -- The noise-trader paradigm. -- Part XIV: Currency Crises and Speculative Attack. -- Recent international financial crises.

-- First generation speculative attack models. -- Second generation models. -- Econometric estimates of speculative attack models.