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Dynamic Speculative Attacks

  • Christophe Chamley

This paper presents a model of rational Bayesian agents with speculative attacks in a regime of exchange rate which is pegged within a band. Speculators learn from the observation of the exchange rate within the band whether their mass is sufficiently large for a successful attack. Multiple periods are necessary for the existence of speculative attacks. Various defense policies are analyzed. A trading policy by the central bank may defend the peg if it is unobserved and diminishes the market's information for the coordination of speculators.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282803322157007
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 603-621

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:603-621
Note: DOI: 10.1257/000282803322157007
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  1. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers 89-24, DELTA (Ecole normale supérieure).
  2. Carlsson, H. & Van Damme, E., 1989. "Global Payoff Uncertainty And Risk Dominance," Papers 8933, Tilburg - Center for Economic Research.
  3. Vives Xavier, 1995. "The Speed of Information Revelation in a Financial Market Mechanism," Journal of Economic Theory, Elsevier, vol. 67(1), pages 178-204, October.
  4. Gale, Douglas, 1995. "Dynamic Coordination Games," Economic Theory, Springer, vol. 5(1), pages 1-18, January.
  5. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-97, June.
  6. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
  7. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-81, March.
  8. Gale, D. & Chamley, C., 1992. "Information Revelation and Strategic Delay in a Model of Investment," Papers 10, Boston University - Department of Economics.
  9. Hellwig, Martin F., 1982. "Rational expectations equilibrium with conditioning on past prices: A mean-variance example," Journal of Economic Theory, Elsevier, vol. 26(2), pages 279-312, April.
  10. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 869-905, August.
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