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Dynamic Speculative Attacks

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  • Christophe Chamley

Abstract

This paper presents a model of rational Bayesian agents with speculative attacks in a regime of exchange rate which is pegged within a band. Speculators learn from the observation of the exchange rate within the band whether their mass is sufficiently large for a successful attack. Multiple periods are necessary for the existence of speculative attacks. Various defense policies are analyzed. A trading policy by the central bank may defend the peg if it is unobserved and diminishes the market's information for the coordination of speculators.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282803322157007
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 603-621

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:603-621

Note: DOI: 10.1257/000282803322157007
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  1. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, Econometric Society, vol. 62(5), pages 1065-85, September.
  2. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 869-905, August.
  3. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers, DELTA (Ecole normale supérieure) 89-24, DELTA (Ecole normale supérieure).
  4. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1315, C.E.P.R. Discussion Papers.
  5. Gale, D., 1992. "Dynamic Coordiantion Games," Papers, Boston University - Department of Economics 13, Boston University - Department of Economics.
  6. Carlsson, H. & Damme, E.E.C. van, 1989. "Global payoff uncertainty and risk dominance," Discussion Paper, Tilburg University, Center for Economic Research 1989-33, Tilburg University, Center for Economic Research.
  7. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 587-97, June.
  8. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 153-81, March.
  9. Vives, X., 1992. "The Speed of Information Revelation in a Financial Market Mechanism," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 174.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  10. HELLWIG, Martin F., . "Rational expectations equilibrium with conditioning on past prices: a mean-variance example," CORE Discussion Papers RP -480, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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