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Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies

  • Ramon Moreno

This paper uses nonparametric tests to provide a description of the "stylized facts" associated with episodes of speculative pressure in foreign exchange markets in Pacific Basin Economies and to see whether these "stylized facts" appear to be broadly consistent with the alternative explanations for such episodes suggested in the theoretical literature. ; The empirical results are mixed, but some are nonetheless suggestive. Larger budget deficits and growth in central bank domestic credit appear to be associated with episodes of depreciation rather than episodes of appreciation or periods of tranquility, indicating that unusually expansionary or contractionary policies may contribute to speculative pressures in foreign exchange markets. There also is some evidence that episodes of speculative pressure may arise when economic conditions make it costly for the government to maintain a stable exchange rate.

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File URL: http://www.frbsf.org/econrsrch/econrev/95-3/econrev.-22.pdf
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Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1995)
Issue (Month): ()
Pages: 3-16

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Handle: RePEc:fip:fedfer:y:1995:p:3-16:n:3
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  1. Obstfeld, Maurice, 1996. "Destabilizing Effects of Exchange-Rate Escape Clauses," Department of Economics, Working Paper Series qt15n3p5dt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Reuven Glick & Michael Hutchison, 1992. "Monetary policy, intervention, and exchange rates in Japan," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  3. Cumby, Robert E. & Van Wijnbergen, Sweder, 1989. "Financial policy and speculative runs with a crawling peg: Argentina 1979-1981," Journal of International Economics, Elsevier, vol. 27(1-2), pages 111-127, August.
  4. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1995. "Speculative attacks on pegged exchange rates: an empirical exploration with special reference to the European Monetary System," Working Papers in Applied Economic Theory 95-04, Federal Reserve Bank of San Francisco.
  5. Grilli, Vittorio U., 1986. "Buying and selling attacks on fixed exchange rate systems," Journal of International Economics, Elsevier, vol. 20(1-2), pages 143-156, February.
  6. Linda S. Goldberg, 1990. "Predicting Exchange Rate Crises: Mexico Revisited," NBER Working Papers 3320, National Bureau of Economic Research, Inc.
  7. Paul R. Masson & Allan Drazen, 1994. "Credibility of Policies Versus Credibility of Policymakers," IMF Working Papers 94/49, International Monetary Fund.
  8. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  9. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  10. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  11. Reuven Glick & Ramon Moreno, 1994. "Capital flows and monetary policy in East Asia," Pacific Basin Working Paper Series 94-08, Federal Reserve Bank of San Francisco.
  12. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
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