Models with self fulfilling features obstfeld 1996
European economic review 40 (1996) 1037- 1047 models of currency crises with self-fulfilling features maurice obstfeld department of economics, unioersity of california at berkeley, berkeley, ca 94720, usa change-rate crisis with self-fulfilling features, the paper reviews some other self-reinforcing. Special features of dollar value risk during the 1890s, including an endogenous supply of government-licensed money (national bank notes), and a time-varying probability of a long-run switch to silver, require a different model of speculative attack from the standard approach which assumes a government-controlled supply of money. Obstfeld, maurice, models of currency crisis with self-fulfilling features, european economic review 40 (april 1996) bensaid and olivier jeanne, the instability of fixed exchange rate.
In the second approach (obstfeld, 1986, 1995, 1996), far from being the outcome of markets punishing undisciplined policymakers, speculative attacks may arise simply because of self- fulfilling expectations: given that the central bank's optimal policy is determined endogenously, speculators realize that if they attack the currency, the fixed. Much attention has been paid to models of currency crisis with self-fulfilling features and the concept of multiple equilibria developed in the 1990s. Obstfeld, maurice, models of currency crisis with self-fulfilling features, european economic review 40 (april 1996): 1037-47 obstfeld, maurice, and kenneth rogoff, the mirage of fixed exchange rates,.
Models of currency crises with self-fulfilling features obstfeld, maurice, (1996) contagious speculative attacks obstfeld, maurice, (1996) internationale wirtschaft : theorie und politik der außenwirtschaft krugman, paul r, (2006). Self-fulfilling expectations became decisive in generating a panic only after the government ran down gross reserves and ran up short-term dollar debt we present a simple model to explain how and why multiple equilibria can occur for some levels of reserves or debt, but not for others. Models of currency crises with self-fulfilling features (obstfeld 1996) introduction ems (european monetary system) currencies were subject to speculative attacks from 1992 to 1993 fluctuation bands of the ems currencies with respect to the deutschmark had been widened from ± 225% around par to ± 15% in august 1993 surprisingly the. Obstfeld, m, “models of currency crises with self-fulfilling features,” european economic review , 1996 calvo, g, “varieties of capital-market crises,” university of maryland center for international. 1979-model might account for the features of currency crises as observed in the 1990s and spark self-fulfilling crises (obstfeld, 1994, 1996) hence, even fundamen holds for the obstfeld-model as well: absent any shocks, the economy is better off with a rule, with shocks, however, discretion should be more suitable.
Obstfeld, m 1996, models of currency crises with self-fulfilling features european economic review 40, 1037–47 jeanne, o 1997, are currency crisis self-fulfilling. Evidence from a simple equilibrium model, working paper, london school of economics, 2002  a dasgupta, financial contagion through capital connections: a model of the origin and spread of bank panics, working paper, london school of economics, 2002. Foundations of international macroeconomics, by maurice obstfeld and kenneth rogoff, mit press, october 1996 exchange rate dynamics , martin evans, princeton university press, 2011 recursive macroeconomic theory , 2 nd , by tom sargent and lars ljungqvist, mit press 2004. Maurice obstfeld (1996), 'models of currency crises with self-fulfilling features' european economic review 40 stephen morris and hyun song shin (1998), 'unique equilibrium in a model of self-fulfilling currency attacks.
Self-fulfilling crisis is a mechanism of crisis which highlights the role of expectations the general idea of self-fulfilling currency crisis can be illustrated in the following example modified from obstfeld (1996), in reality, there should be many money holders, but this simplified model captures key features of most cases payoff. Later, models emphasized that reserves do not have to be depleted, nor do fundamentals have to be inconsistent so that countries devalue in fact, currency crises can be self-fulfilling prophecies as noted by obstfeld (1996. S morris and h shin, unique equilibrium in a model of self-fulfilling attacks, american economic review , 1998 m obstfeld, models of currency crises with self-fulfilling features,” european economic.
Models with self fulfilling features obstfeld 1996
Join github today github is home to over 28 million developers working together to host and review code, manage projects, and build software together. A key feature of a self-fulfilling crisis, as is clear from the analysis of obstfeld (1996) and radelet and sachs (1998), is the collective action of economic agents the collective action may be prompted either by random shocks such as sunspots or. This paper re-examines an illustrative model of obstfeld (1996), in which high unemployment may cause an exchange-rate crisis with selffulfilling features by completing the algebraic demonstration, this paper shows that there are less equilibria than conjecturedself-fulfilling currency crisis, fixed exchange rate, multiple equilibria. Self-fulﬁlling currency crises: the role of interest rates by christian hellwig,arijit mukherji, and aleh tsyvinski we develop a model of currency crises, in which traders are heterogeneously informed, and interest rates are endogenously determined in a noisy rational.
- Generation model, we will consider second generation models (obstfeld, 1996), third generation models (aghion, bacchetta, and banerjee, 2001), and imperfect common knowledge models of exchange rate determination (morris and shin, 1998.
- The general idea of self-fulfilling currency crisis can be illustrated in the following example modified from obstfeld (1996),  which explains why pegged exchange rates that could be sustained in the absence of speculative attack can be overthrown by market pessimism among investors this prototype model contains three agents, a government and two investors.
- Obstfeld’s models (1994 1996) the central bank minimizes a quadratic loss function that depends on inflation and on the deviation of output from its natural rate (see barro and gordon, 1983, for a discussion of this type of loss function.
(1996) models of currency crises with self-fulfilling features european economic review 40(april):1037-1048 with respect to maurice obstfeld's contention that krugman's version [are currency crises self-fulfilling]: comment. 2 the models of self-fulfilling (obstfeld (1986b) and (1996)) and contagious speculative attacks (gerlach and smets (1994)) are not predicated on expansionary fiscal policy 3 with the possible exception of the fiscal easing associated with the run-up to the presidential election in. Obstfeld, m “models of currency crises with self-fulfilling features,” european economic review, 1996 obstfeld, maurice “rational and self-fulfilling balance-of-payments crises,” american economic. These differences have prompted some economists to consider explanations in which the beliefs of speculators may affect the government’s incentive to defend or abandon a currency peg, leading to self-fulfilling currency crises (see obstfeld 1994.