Discussion paper

DP2893 Speculation and the Decision to Abandon a Fixed Exchange Rate Regime

This Paper demonstrates that the implications of first-generation speculative attack models do not
hold if there is a rational, forward-looking policy maker. The policy maker will be able to avoid
predictable speculative attacks by introducing uncertainty into the decisions of speculators. This
changes the sudden attack into a prolonged period of increasing speculation and uncertainty. In
addition, the model provides useful insights into the viability of temporary nominal anchor policies,
and a theoretical foundation for a useful empirical methodology.

£6.00
Citation

Pastine, I (2001), ‘DP2893 Speculation and the Decision to Abandon a Fixed Exchange Rate Regime‘, CEPR Discussion Paper No. 2893. CEPR Press, Paris & London. https://cepr.org/publications/dp2893