Contagious speculative attacks
During the European exchange market turmoil in 1992-93 it was evident that speculative attacks tended to spread across currencies. Using a twocountry version of the model developed by Flood and Garber (1984) we show how a speculative attack against one currency may accelerate the "warranted" collapse of a second parity. More importantly, even if the parity of the second currency is viable in the absence of a collapse of the first one, it might be subjected to a speculative attack if the reserves available to defend the parity are "small".
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- Obstfeld, Maurice, 1986.
"Rational and Self-fulfilling Balance-of-Payments Crises,"
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- Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
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1230, National Bureau of Economic Research, Inc.
- Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
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