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Federal Reserve Bank of San Francisco
Working Papers in Applied Economic Theory
Speculative attacks on pegged exchange rates: an empirical exploration with special reference to the European Monetary System
Barry Eichengreen
Andrew K. Rose
Charles Wyplosz
Abstract

This paper presents an empirical analysis of speculative attacks on pegged exchange rates in 22 countries between 1967 and 1992. We define speculative attacks or crises as large movements in exchange rates, interest rates, and international reserves. We develop stylized facts concerning the univariate behavior of a variety of macroeconomic variables, comparing crises with periods of tranquility. For ERM observations we cannot reject the null hypothesis that there are few significant differences in the behavior of key macroeconomic variables between crises and non-crisis periods. This null can be decisively rejected for non-ERM observations, however. Precisely the opposite pattern is evidence in the behavior of actual realignments and changes in exchange rate regimes. We attempt to tie these findings to the theoretical literature on balance of payments crises.


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Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, Speculative attacks on pegged exchange rates: an empirical exploration with special reference to the European Monetary System, Federal Reserve Bank of San Francisco, Working Papers in Applied Economic Theory 95-04, 1995.
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Keywords: Balance of payments ; European Monetary System (Organization) ; Foreign exchange rates
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