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

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  • Ramon Moreno

Abstract

This paper uses non-parametric 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 of the results are nonetheless suggestive. Episodes of depreciation appear to be associated with larger budget deficits and growth in central bank domestic credit, 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 is also some evidence that episodes of speculative pressure may arise when economic conditions make it costly for the government to maintain a stable exchange rate. ; Published in FRBSF Economic Review (1995, no. 3, p 3-16)

Suggested Citation

  • Ramon Moreno, 1995. "Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies," Pacific Basin Working Paper Series 95-05, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfpb:95-05
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    References listed on IDEAS

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    1. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," NBER Working Papers 4898, National Bureau of Economic Research, Inc.
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    3. 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 148-166, February.
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    6. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    7. 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.
    8. Obstfeld, Maurice, 1997. "Destabilizing effects of exchange-rate escape clauses," Journal of International Economics, Elsevier, vol. 43(1-2), pages 61-77, August.
    9. Allan Drazen & Paul R. Masson, 1994. "Credibility of Policies Versus Credibility of Policymakers," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 735-754.
    10. Reuven Glick & Michael M. Hutchison, 1992. "Monetary policy, intervention, and exchange rates in Japan," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
    11. 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.
    12. 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.
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