The Role And Nature Of Market Sentiment In The 1992 Erm Crisis
AbstractThis paper attempts to explain the importance of the role of the speculators in determining the 1992 ERM crisis, and the effects that the policy of maintaining external parity had on internal growth. We focus on a different way through which expectations are formed about the macroeconomic fundamentals independently of the behaviour of the monetary policy. In the present model, agents’ rational beliefs do not emerge from arbitrary circumstances but only when the value of the exchange rate, kept under control by the central bank, did not correspond to the expected value and to the current wide-spread beliefs in the market.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 02-20.
Length: 17 pages
Date of creation: Sep 2002
Date of revision:
Contact details of provider:
Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
Other versions of this item:
- Oreste Napolitano & Alberto Montagnoli & Rosaria Rita Canale, 2002. "The Role And Nature Of Market Sentiment In The 1992 Erm Crisis," Public Policy Discussion Papers 02-20, Economics and Finance Section, School of Social Sciences, Brunel University.
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