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Title: Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System

Author(s): Barry Eichengreen, Andrew K Rose and Charles Wyplosz

Publication Date: November 1994

Keyword(s): Balance of Payments Crisis, ERM and Speculative Attacks

Programme Area(s): International Macroeconomics

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 behaviour 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 behaviour of key macroeconomic variables between crisis and non-crisis periods. This null hypothesis can be decisively rejected for non-ERM observations, however. Precisely the opposite pattern is evident in the behaviour 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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Bibliographic Reference

Eichengreen, B, Rose, A and Wyplosz, C. 1994. 'Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1060