Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System
2017
Eichengreen, Barry | Rose, Andrew K. | Wyplosz, Charles
This paper presents an empirical analysis of speculative attacks on pegged exchange rates in22 counties between 1967 and 1992. We define speculative attacks or crises as largemovements in exchange rates, interest rates, and international reserves. We develop stylizedfacts concerning the univariate behavior of a variety of macroeconomic variables, comparingcrises with periods of tranquility. For ERM observations we cannot reject the null hypothesisthat there are few significant differences in the behavior of key macroeconomic variablesbetween crises and non-crisis periods. This null can be decisively rejected for non-ERMobservations, however. Precisely the opposite pattern is evident in the behavior of actualrealignments and changes in exchange rate regimes. We attempt to tie these findings to thetheoretical literature on balance of payments crises.
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