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An Empirical Characterisation of Speculative Pressure: A Comprehensive Panel Study Using LDV Models in High Frequency

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  • Tassos Anastasatos

    ()
    (Dept of Economics Univ. of Loughborough)

  • Ian R. Davidson

    ()
    (Business School Univ. of Loughborough)

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    Abstract

    This article provides a general and robust empirical examination of speculative pressure on various exchange rate regimes using an unusually large panel of monthly data for developed countries, analyzed within the framework of Limited-Dependent Variable (LDV) models with various innovations and extensions. In comparison to studies with lower frequency data, significant differences are found in linking crises with macroeconomic, financial and political fundamentals, despite the noise increasing tendency of higher frequency data. Considerable heterogeneity in the events surrounding crises is documented, rendering globally applicable rules for prediction and prevention inappropriate. The findings are robust to different specifications but the definition of crisis has a bearing on its predictability.

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    Bibliographic Info

    Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2004_8.

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    Date of creation: Aug 2004
    Date of revision: Aug 2004
    Handle: RePEc:lbo:lbowps:2004_8

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    Keywords: Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models.;

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    15. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
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    17. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, Octomber.
    18. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
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