Currency crisis duration and interest defence
AbstractAsymmetric wars of attrition between speculators and a Central Bank can provide a useful framework to address currency crisis length and explain why a speculative attack can fail after some time. Interest rate defence can be analysed too. A non-linear relationship between interest rates and peg defence emerges, as a rate upsurge can reduce both concession times. With some welfare loss functions, increasing the domestic rate too much is a self-defeating policy as the Central Bank will opt out before speculators concede, but the reverse holds for lower rates. Copyright © 2008 John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 14 (2009)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
- Bensaid, B.B. & Jeanne, O., 1995.
"The Instability of Fixed Exchange Rate Systems when Raising the Nominal Interest Rate is Costly,"
9536, Tilburg - Center for Economic Research.
- Bensaid, Bernard & Jeanne, Olivier, 1997. "The instability of fixed exchange rate systems when raising the nominal interest rate is costly," European Economic Review, Elsevier, vol. 41(8), pages 1461-1478, August.
- Kraay, Aart, 2000.
"Do high interest rates defend currencies during speculative attacks ?,"
Policy Research Working Paper Series
2267, The World Bank.
- Kraay, Aart, 2003. "Do high interest rates defend currencies during speculative attacks?," Journal of International Economics, Elsevier, vol. 59(2), pages 297-321, March.
- Ponsati, Clara & Sakovics, Jozsef, 1995.
"The war of attrition with incomplete information,"
Mathematical Social Sciences,
Elsevier, vol. 29(3), pages 239-254, June.
- Alberto Alesina & Allan Drazen, 1989.
"Why are Stabilizations Delayed?,"
NBER Working Papers
3053, National Bureau of Economic Research, Inc.
- Allsopp, Louise, 2000. "A Model to Explain the Duration of a Currency Crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 331-37, October.
- Casella, Alessandra & Eichengreen, Barry, 1994.
"Can Foreign Aid Accelerate Stabilization?,"
CEPR Discussion Papers
961, C.E.P.R. Discussion Papers.
- Pastine, Ivan, 2001.
"Speculation and the Decision to Abandon a Fixed Exchange Rate Regime,"
CEPR Discussion Papers
2893, C.E.P.R. Discussion Papers.
- Pastine, Ivan, 2002. "Speculation and the decision to abandon a fixed exchange rate regime," Journal of International Economics, Elsevier, vol. 57(1), pages 197-229, June.
- Ivan Pastine, 2000. "Speculation and the Decision to Abandon a Fixed Exchange Rate Regime," Econometric Society World Congress 2000 Contributed Papers 0931, Econometric Society.
- Allan Drazen, 2003. "Interest Rate Defense against Speculative Attack as a Signal. A Primer," NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 37-60 National Bureau of Economic Research, Inc.
- Grubel, Herbert, 2005. "Small country benefits from monetary union," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 509-523, June.
- Barry Eichengreen & Andrew K. Rose, 2003. "Does It Pay to Defend against a Speculative Attack?," NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 61-86 National Bureau of Economic Research, Inc.
- Derrick Reagle & Dominick Salvatore, 2000. "Forecasting Financial Crises in Emerging Market Economies," Open Economies Review, Springer, vol. 11(3), pages 247-259, July.
- Obstfeld, Maurice, 1986.
"Rational and Self-fulfilling Balance-of-Payments Crises,"
American Economic Review,
American Economic Association, vol. 76(1), pages 72-81, March.
- Maurice Obstfeld, 1986. "Rational and Self-Fulfilling Balance-of-Payments Crises," NBER Working Papers 1486, National Bureau of Economic Research, Inc.
- Fudenberg, Drew & Tirole, Jean, 1986. "A Theory of Exit in Duopoly," Econometrica, Econometric Society, vol. 54(4), pages 943-60, July.
- Amartya Lahiri & Carlos A. Vegh, 2003. "Delaying the Inevitable: Interest Rate Defense and Balance of Payments Crises," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 404-424, April.
- Drazen, Allan, 2000. "Interest-rate and borrowing defense against speculative attack," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 303-348, December.
- Barry Nalebuff & John G. Riley, 1984. "Asymmetric Equilibrium in the War of Attrition," UCLA Economics Working Papers 317, UCLA Department of Economics.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2002.
"The Role of Large Players in Currency Crises,"
in: Preventing Currency Crises in Emerging Markets, pages 197-268
National Bureau of Economic Research, Inc.
- Drazen, Allan & Hubrich, Stefan, 2003. "Mixed Signals in Defending the Exchange Rate: What do the Data Say?," CEPR Discussion Papers 4050, C.E.P.R. Discussion Papers.
- Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
- Ozkan, F Gulcin & Sutherland, Alan, 1995. "Policy Measures to Avoid a Currency Crisis," Economic Journal, Royal Economic Society, vol. 105(429), pages 510-19, March.
- Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
- Michael P. Dooley & Jeffrey A. Frankel, 2003. "Managing Currency Crises in Emerging Markets," NBER Books, National Bureau of Economic Research, Inc, number dool03-1, May.
- Shinji Takagi, 2010. "Applying the Lessons of Asia : The IMFÃ¢â‚¬â„¢s Crisis Management Strategy in 2008," Macroeconomics Working Papers 22822, East Asian Bureau of Economic Research.
- Shinji Takagi, 2010. "Applying the Lessons of Asia: The IMF’s Crisis Management Strategy in 2008," Working Papers id:3006, eSocialSciences.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.