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  3. American Economic Review
  4. June 2003
  5. Dynamic Speculative Attacks

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Dynamic Speculative Attacks

  • Christophe Chamley
American Economic Review
vol. 93, no. 3, June 2003
(pp. 603–621)
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Abstract

This paper presents a model of rational Bayesian agents with speculative attacks in a regime of exchange rate which is pegged within a band. Speculators learn from the observation of the exchange rate within the band whether their mass is sufficiently large for a successful attack. Multiple periods are necessary for the existence of speculative attacks. Various defense policies are analyzed. A trading policy by the central bank may defend the peg if it is unobserved and diminishes the market's information for the coordination of speculators.

Citation

Chamley, Christophe. 2003. "Dynamic Speculative Attacks ." American Economic Review, 93 (3): 603–621. DOI: 10.1257/000282803322157007

JEL Classification

  • F31 Foreign Exchange
  • G15 International Financial Markets