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Author: | Agenor, P. Masson, P. |
Title: | Credibility, reputation, and the Mexican Peso crisis |
Journal: | Journal of Money, Credit and Banking
1999 : FEB, VOL. 31:1, p. 70-84 |
Index terms: | CREDIT REPUTATION MEXICO |
Language: | eng |
Abstract: | A model emphasizing the trade-off between the costs of changes of domestic interest rates and exchange rate stability is used to access the role of credibility and reputational factors in the lead-up to the December 1994 crisis of the Mexican peso. Devaluation expectations are decomposed into the probability that the authorities do not truly put a high weight on exchange rate stability and the probability that an exogenous shock will make a devaluation the preferred policy. |
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