Contagious Speculative Attacks
AbstractDuring the European exchange market turmoil in 1992-3 it was evident that speculative attacks tended to spread across currencies. Using a two-country version of the model developed by Flood and Garber (1984) we show how a speculative attack against one currency may accelerate the `warranted' collapse of a second parity. More important, even if the parity of the second currency is viable in the absence of a collapse of the first one, it might be subjected to a speculative attack if the reserves available to defend the parity are `small'.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1055.
Date of creation: Nov 1994
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Other versions of this item:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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NBER Working Papers
1486, National Bureau of Economic Research, Inc.
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