TY  - JOUR
AU  - Goldberg,Linda S.
TI  - Predicting Exchange Rate Crises:  Mexico Revisited
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3320
PY  - 1990
Y2  - April 1990
UR  - http://www.nber.org/papers/w3320
L1  - http://www.nber.org/papers/w3320.pdf
N1  - Author contact info:
Linda S. Goldberg
Research Department, 3rd Floor
Federal Reserve Bank-New York
33 Liberty Street
New York, NY 10045
Tel: 212/720-2836
Fax: 212/720-6831
E-Mail: linda.goldberg@ny.frb.org
AB  - This paper predicts ex-ante the probability of currency crises end size of expected devaluations month by month for Mexico between 1980 and 1986 using a heterodox linear discrete time model of exchange rate crises. The forces contributing to speculative attacks on the Mexican peso include internal money creation, external credit shocks, and relative price shocks. The framework proves highly successful for generating forecasts of the probability of speculative attacks on the peso and for predicting lower bounds for post- collapse exchange rates using a range of assumptions about critical levels of central bank reserve floors. Simulation results suggest that reducing domestic credit growth, increasing the uncertainty surrounding this growth, and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso in some of the crisis periods between 1980 and 1986.
ER  -