Predicting Exchange Rate Crises: Mexico Revisited
This paper predicts ex-ante the probability of currency crises end size of expected devaluations month by month for Mexico between 1980 and 1986 using a heterodox linear discrete time model of exchange rate crises. The forces contributing to speculative attacks on the Mexican peso include internal money creation, external credit shocks, and relative price shocks. The framework proves highly successful for generating forecasts of the probability of speculative attacks on the peso and for predicting lower bounds for post- collapse exchange rates using a range of assumptions about critical levels of central bank reserve floors. Simulation results suggest that reducing domestic credit growth, increasing the uncertainty surrounding this growth, and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso in some of the crisis periods between 1980 and 1986.
|Date of creation:||Apr 1990|
|Publication status:||published as Journal of International Economics, vol. 36, no. 3/4, May 1994, p.413-430.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goldberg, Linda S., 1991.
"Collapsing exchange rate regimes: shocks and biases,"
Journal of International Money and Finance,
Elsevier, vol. 10(2), pages 252-263, June.
- Linda S. Goldberg, 1988. "Collapsing Exchange Rate Regimes: Shocks and Biases," NBER Working Papers 2702, National Bureau of Economic Research, Inc.
- Maurice Obstfeld, 1983.
"Balance-of-Payments Crises and Devaluation,"
NBER Working Papers
1103, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3320. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.