Self-Fulfilling Risk Predictions : An Application to Speculative Attacks / Robert Flood, Nancy Marion.
Saved in:
| Online Access: |
Full Text (via IMF e-Library) |
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| Main Author: | |
| Other Authors: | |
| Format: | eBook |
| Language: | English |
| Published: |
Washington, D.C. :
International Monetary Fund,
1998.
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| Series: | IMF working paper ;
WP/1998/124. |
| Abstract: | The paper shows that changing market beliefs about currency risk can generate a self-fulfilling speculative attack on a fixed exchange rate. The attack does not require a later change in policies to make it profitable. This is illustrated by introducing an endogenous risk premium into a 'first-generation model' of a speculative attack. The model is further modified to take account of sterilization, debt-financed fiscal deficits, and anticipatory price-setting behavior. The model is used to interpret the 1994 Mexican peso crisis. |
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| Physical Description: | 1 online resource (34 pages) |
| ISSN: | 1018-5941 |
| Source of Description, Etc. Note: | Description based on print version record. |