Exchange Rate Market Tensions in a Small Open Economy During the Transition to EMU: can Asian countries learn from the Portuguese experience in 1992-1995?
This paper studies the various Portuguese escudo exchange rate crises during the period 1992-95. Were they the result of the market evaluation of the Portuguese economy fundamentals? Were they the outcome of the expected political changes? Or, to the contrary, can we suggest self-fulfilling crises? After a general introduction, the paper starts with an estimation of the exchange rate policy credibility a la Svensson and a brief description of the escudo exchange rate crises. The paper then presents different theoretical explanations for speculative attacks, paying special attention to the new formalizations of the behavior of market agents. We conclude with some non-native remarks concerning the Portuguese exchange rate crises, and some lessons that Asian countries can learn from the Portuguese experience.
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Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number
1999/07.
Length: Date of creation: 1999 Date of revision: Handle: RePEc:ise:isegwp:wp71999
Contact details of provider: Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL Web page: http://www.iseg.utl.pt/departamentos/economia/
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Find related papers by JEL classification: F3 - International Economics - - International Finance E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
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