Speculative Attacks and Currency Crises: The Mexican Experience
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.
Series:
Working Paper No. 1995/112
Subject:
Conventional peg Crawling peg Currencies Exchange rate arrangements Exchange rates Foreign exchange Money
English
Publication Date:
November 1, 1995
ISBN/ISSN:
9781451853544/1018-5941
Stock No:
WPIEA1121995
Pages:
38
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