Finanial Policy and Speculative Runs with a Crawling Peg: Argentina 1979-1981 / Robert E. Cumby, Sweder van Wijnbergen.

Format:

Book

Author/Creator:

Cumby, Robert E.

Contributor:

National Bureau of Economic Research.

van Wijnbergen, Sweder.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2376.

NBER working paper series no. w2376

Language:

English

Subjects (All):

Balance of payments.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Finanial Policy and Speculative Runs with a Crawling Peg

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1987.

Cambridge, Mass : National Bureau of Economic Research, 1987.

Summary:

In this paper we present a model of a balance-of-payments crisis and use it to examine the Argentine experiment with a crawling peg between December 1978 and February 1981. The approach taken allows us to examine the evolution of a crisis when the collapse is not a perfectly-foreseen event. The implementation of the model yields plausible values of the one-month ahead probabilities of a collapse of the crawling peg. The probabilities exhibit a sharp increase in the middle of 1980 and indicate a significant loss of credibility throughout the remainder of the year. The results suggest that viability of an exchange rate regime depends strongly on the domestic credit policy followed by the authorities. If this policy is not consistent with the exchange rate policy pursued by the authorities, confidence in the exchange rate policy is undermined.

Notes:

Print version record

September 1987.