Speculative Attacks and Currency Crises: The Mexican Experience

November 1, 1995

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Format: Chicago

Inci Ötker, and Ceyla Pazarbasioglu. Speculative Attacks and Currency Crises: The Mexican Experience, (USA: International Monetary Fund, 1995) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper estimates a speculative attack model of currency crises in order to identify the role of economic fundamentals and any early warning signals of a potential currency crisis. The data from the Mexican economy was used to illustrate the model. Based on the results, a deterioration in fundamentals appears to have generated high one-step-ahead probabilities for the regime changes during the sample period 1982-1994. Particularly, increases in inflation differentials, appreciations of the real exchange rate, foreign reserve losses, expansionary monetary and fiscal policies, and increases in the share of short-term foreign currency debt appear to have contributed to the market pressures and regime changes in that period.

Subject: Conventional peg, Crawling peg, Currencies, Exchange rate arrangements, Exchange rates, Foreign exchange, Money

Keywords: Band exchange rate mechanism, Central bank, Conventional peg, Crawling band exchange rate mechanism, Crawling peg, Currencies, Currency crisis model, Currency float, Devaluation of the peso, Devaluation probability, Exchange rate arrangements, Exchange rate depreciation, Exchange rate realignment, Exchange rate system, Exchange rates, Fixed exchange rate system, Intervention band, Mexican peso, U.S. dollar, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/112
Stock No:

WPIEA1121995
ISBN:

9781451853544
ISSN:

1018-5941

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