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The lira and the pound in the 1992 currency crisis: Fundamentals or speculation?

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Author Info

  • Michele Fratianni
  • Michael Artis

Abstract

The prevalent explanation of the Exchange Rate Mechanism (ERM) currency crisis of September, 1992 is that myopic speculation prevailed over the “fundamentals.†Our paper explores the reasons why the Italian lira and the U.K. pound were attacked and, subsequently, forced out of the ERM. The crisis was sparked by a common awareness that political unification and the commitment to monetary union had petered out in the summer of 1992, leaving the field open to speculators to pick countries with the weakest fundamentals (Italy) or with policy makers who feared jeopardizing an economic recovery by keeping the currency in the ERM (the U.K.). Copyright Kluwer Academic Publishers 1996

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 7 (1996)
Issue (Month): 1 (March)
Pages: 573-589

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Handle: RePEc:kap:openec:v:7:y:1996:i:1:p:573-589

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: EMS; currency speculation; credibility; F31; F33; C12;

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References

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  1. Lars E. O. Svensson, 1991. "The Simplest Test of Target Zone Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 655-665, September.
  2. Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. "Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht," Papers 674, Yale - Economic Growth Center.
  3. Andrew K. Rose & Lars E.O. Svensson, 1993. "European Exchange Rate Credibility Before the Fall," NBER Working Papers 4495, National Bureau of Economic Research, Inc.
  4. Giavazzi, Francesco & Spaventa, Luigi, 1990. "The `New' EMS," CEPR Discussion Papers 369, C.E.P.R. Discussion Papers.
    • Francesco Giavazzi & Luigi Spaventa, 1990. "The "New" EMS," Working Papers 86, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
  6. Artis, Michael J, 1993. "Turning Point Prediction for the UK using CSO Leading Indicators," CEPR Discussion Papers 833, C.E.P.R. Discussion Papers.
  7. Fratianni, M. & Von Hagen, J. & Waller, C., 1992. "The Maastricht Way to EMU," Princeton Studies in International Economics 187, International Economics Section, Departement of Economics Princeton University,.
  8. repec:nsr:niesrd:58 is not listed on IDEAS
  9. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
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Citations

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Cited by:
  1. Fratianni Michele, 2012. "150 years of Italian political unity and economic dualism: An Introduction," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 335-346.
  2. Jo-Hui Chen & Chih-Sean Chen, 2012. "The study of contagious paces of financial crises," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(6), pages 1825-1846, October.
  3. Kobayashi, Teruyoshi, 2005. "A model of monetary unification under asymmetric information," International Review of Economics & Finance, Elsevier, vol. 14(1), pages 1-15.
  4. Woo, Kai-Yin, 1999. "Cointegration analysis of the intensity of the ERM currencies under the European Monetary System," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(4), pages 393-405, November.
  5. Amato, Amedeo & Tronzano, Marco, 2000. "Fiscal policy, debt management and exchange rate credibility: Lessons from the recent Italian experience," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 921-943, June.

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