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Implications of within-period timing in models of speculative attack

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  • Antonio Doblas-Madrid

    (Department of Economics, Michigan State University)

Abstract

Speculative attacks are often modeled as decreases in money demand before currency crises. I discuss how, in models with microfoundations, within-period timing affects whether attacks arise in equilibrium. “Cash-when-I'm-done” timing always generates attacks, but is controversial because it assumes that end-of-period money balances buy current consumption. Cash-in-advance timing, theoretically more appealing, generates attacks only under restrictive assumptions. These issues arise when money is introduced via liquidity constraints, the utility function, or a transactions technology. Modeling attacks via reductions in demand for domestic bonds, instead of reductions in money demand, helps avoid these issues, and may be more realistic.

Suggested Citation

  • Antonio Doblas-Madrid, 2007. "Implications of within-period timing in models of speculative attack," Economics Bulletin, AccessEcon, vol. 6(28), pages 1-10.
  • Handle: RePEc:ebl:ecbull:eb-07f30006
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume6/EB-07F30006A.pdf
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    References listed on IDEAS

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    Cited by:

    1. Zhiming Fu & Antoine Le Riche, 2021. "Progressive consumption tax and monetary policy in an endogenous growth model," Journal of Economics, Springer, vol. 133(3), pages 271-293, August.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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