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Implications of within-period timing in models of speculative attack


  • Antonio Doblas-Madrid

    () (Department of Economics, Michigan State University)


Speculative attacks are often modeled as decreases in money demand before currency crises. I discuss how, in models with microfoundations, within-period timing affects whether attacks arise in equilibrium. “Cash-when-I'm-done” timing always generates attacks, but is controversial because it assumes that end-of-period money balances buy current consumption. Cash-in-advance timing, theoretically more appealing, generates attacks only under restrictive assumptions. These issues arise when money is introduced via liquidity constraints, the utility function, or a transactions technology. Modeling attacks via reductions in demand for domestic bonds, instead of reductions in money demand, helps avoid these issues, and may be more realistic.

Suggested Citation

  • Antonio Doblas-Madrid, 2007. "Implications of within-period timing in models of speculative attack," Economics Bulletin, AccessEcon, vol. 6(28), pages 1-10.
  • Handle: RePEc:ebl:ecbull:eb-07f30006

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    References listed on IDEAS

    1. Carlstrom, Charles T. & Fuerst, Timothy S., 2001. "Timing and real indeterminacy in monetary models," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 285-298, April.
    2. Maurice Obstfeld, 1986. "Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 1-22, February.
    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
    5. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    6. Harold L. Cole & Timothy J. Kehoe, 2000. "Self-Fulfilling Debt Crises," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 91-116.
    7. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2004. "Government guarantees and self-fulfilling speculative attacks," Journal of Economic Theory, Elsevier, vol. 119(1), pages 31-63, November.
    8. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    9. Calvo, Guillermo A, 1987. "Balance of Payments Crises in a Cash-in-Advance Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 19-32, February.
    10. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
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    JEL classification:

    • F3 - International Economics - - International Finance
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates


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