Was the French Franc Crisis a Sunspot Equilibrium?
AbstractThis paper examines the extent to which speculation against the French franc in 1992-93 was motivated by the fundamentals or resulted from a sunspot phenomenon. We develop a model of currency crises which encompasses both hypotheses about the origin of speculation. The estimation shows that the model with sunspots not only better tracks the episodes of speculation, but also gives a better account of the relationship between the fundamentals and the devaluation expectations.
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Bibliographic InfoPaper provided by University of California at Berkeley in its series Center for International and Development Economics Research (CIDER) Working Papers with number C97-095.
Date of creation: 01 Oct 1997
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