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Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies

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  • Ramon Moreno

Abstract

This paper uses non-parametric tests to provide a description of the "stylized facts" associated with episodes of speculative pressure in foreign exchange markets in Pacific Basin Economies, and to see whether these "stylized facts" appear to be broadly consistent with the alternative explanations for such episodes suggested in the theoretical literature. ; The empirical results are mixed, but some of the results are nonetheless suggestive. Episodes of depreciation appear to be associated with larger budget deficits and growth in central bank domestic credit, than episodes of appreciation or periods of tranquility, indicating that unusually expansionary or contractionary policies may contribute to speculative pressures in foreign exchange markets. There is also some evidence that episodes of speculative pressure may arise when economic conditions make it costly for the government to maintain a stable exchange rate. ; Published in FRBSF Economic Review (1995, no. 3, p 3-16)

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 95-05.

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Date of creation: 1995
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Handle: RePEc:fip:fedfpb:95-05

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Keywords: Foreign exchange ; Budget deficits ; Pacific Area;

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  1. Grilli, Vittorio U., 1986. "Buying and selling attacks on fixed exchange rate systems," Journal of International Economics, Elsevier, vol. 20(1-2), pages 143-156, February.
  2. Maurice Obstfeld, 1991. "Destabilizing Effects of Exchange-Rate Escape Clauses," NBER Working Papers 3603, National Bureau of Economic Research, Inc.
  3. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  4. Drazen, Allan & Masson, Paul R, 1994. "Credibility of Policies versus Credibility of Policymakers," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 735-54, August.
  5. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," NBER Working Papers 4898, National Bureau of Economic Research, Inc.
  6. Reuven Glick & Michael Hutchison, 1993. "Monetary policy, intervention, and exchange rates in Japan," Pacific Basin Working Paper Series 93-07, Federal Reserve Bank of San Francisco.
  7. Goldberg, Linda S., 1994. "Predicting exchange rate crises : Mexico revisited," Journal of International Economics, Elsevier, vol. 36(3-4), pages 413-430, May.
  8. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  9. Cumby, Robert E. & Van Wijnbergen, Sweder, 1989. "Financial policy and speculative runs with a crawling peg: Argentina 1979-1981," Journal of International Economics, Elsevier, vol. 27(1-2), pages 111-127, August.
  10. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  11. Reuven Glick & Ramon Moreno, 1994. "Capital flows and monetary policy in East Asia," Pacific Basin Working Paper Series 94-08, Federal Reserve Bank of San Francisco.
  12. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
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