| Ivan Pastine, Bilkent University |
| Speculation and the Decision to Abandon a Fixed Exchange Rate Regime |
| Session: C-12-12 Wednesday 16 August 2000 by Pastine, Ivan |
| This paper investigates the extent to which it is possible for speculative attacks to be predictable given information on economic fundamentals. A standard model of predictable attacks is extended to incorporate an optimizing monetary authority. It is shown that while incorporating a forward-looking monetary authority improves our understanding of many observed phenomena, it also implies that the branch of the literature that places emphasis on predictable movements in fundamentals cannot generate predictable speculative attacks. In addition, the model provides useful insights into the viability of temporary nominal anchor policies, and a theoretical foundation for an important empirical methodology. |
| Submitted paper full-text in .pdf |