Predicting Exchange Rate Crises: Mexico Revisited
AbstractThis paper predicts ex-ante the probability of currency crises end size of expected devaluations month by month for Mexico between 1980 and 1986 using a heterodox linear discrete time model of exchange rate crises. The forces contributing to speculative attacks on the Mexican peso include internal money creation, external credit shocks, and relative price shocks. The framework proves highly successful for generating forecasts of the probability of speculative attacks on the peso and for predicting lower bounds for post- collapse exchange rates using a range of assumptions about critical levels of central bank reserve floors. Simulation results suggest that reducing domestic credit growth, increasing the uncertainty surrounding this growth, and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso in some of the crisis periods between 1980 and 1986.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3320.
Date of creation: Apr 1990
Date of revision:
Publication status: published as Journal of International Economics, vol. 36, no. 3/4, May 1994, p.413-430.
Note: ITI IFM
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Other versions of this item:
- Goldberg, Linda S., 1994. "Predicting exchange rate crises : Mexico revisited," Journal of International Economics, Elsevier, vol. 36(3-4), pages 413-430, May.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Linda S. Goldberg, 1988.
"Collapsing Exchange Rate Regimes: Shocks and Biases,"
NBER Working Papers
2702, National Bureau of Economic Research, Inc.
- Goldberg, Linda S., 1991. "Collapsing exchange rate regimes: shocks and biases," Journal of International Money and Finance, Elsevier, vol. 10(2), pages 252-263, June.
- Obstfeld, Maurice, 1984.
"Balance-of-Payments Crises and Devaluation,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 16(2), pages 208-17, May.
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