Coping with the speculative attack against the forint's band
AbstractOn 15 and 16 January 2003, an intensive speculative attack was launched against the exchange rate band of the forint. This study analyses the monetary policy decisions with regard to the antecedents of the speculation, the events of the speculative episode and the subsequent period of consolidation. The study finds that the speculative attack was irrational and unjustified in view of several considerations. Through adjustments in the policy rate and the modification of monetary instruments, the MNB was able to defend the exchange rate band of the forint. The MNB successfully localized the effects of the speculative attack on the interbank market. The MNB’s presence on the foreign exchange market facilitated the rapid and controlled withdrawal of the speculative capital, without threatening the disinflation process and the stability of the financial system. The investors taking part in the speculation incurred substantial losses, while the market developments after the speculative episode increased the banking system’s profit.
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Bibliographic InfoPaper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Background Studies (discontinued) with number 2003/3.
Length: 34 pages
Date of creation: 2003
Date of revision:
financial markets; speculative attack; exchange rate; speculative episode.;
Find related papers by JEL classification:
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
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- Péter Gábriel & Klára Pintér, 2006. "The effect of the MNB’s communication on financial markets," MNB Working Papers 2006/9, Magyar Nemzeti Bank (the central bank of Hungary).
- Jan Filácek & Roman Horváth & Michal Skorepa, 2006.
"Monetary Policy before Euro Adoption: Challenges for EU New Members,"
William Davidson Institute Working Papers Series
wp853, William Davidson Institute at the University of Michigan.
- Filacek, Jan & Horvath, Roman & Skorepa, Michal, 2006. "Monetary Policy before Euro Adoption: Challenges for EU New Members," MPRA Paper 879, University Library of Munich, Germany.
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