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Speculation and monetary policy behaviour in the 1992 currency crisis: the Italian case

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  • Rosaria Rita Canale
  • Alberto Montagnoli
  • Oreste Napolitano

Abstract

The paper proposes an explanation for the 1992 currency crisis as the result of monetary policy behaviour and private agents' speculation. Our analysis reveals how speculators' expectations and the behaviour of the monetary policy authority were formed on the widespread beliefs about the future value of income. We show that the real effects of monetary policy measures represent the link between the action of the central bank and speculation.

Suggested Citation

  • Rosaria Rita Canale & Alberto Montagnoli & Oreste Napolitano, 2008. "Speculation and monetary policy behaviour in the 1992 currency crisis: the Italian case," International Economic Journal, Taylor & Francis Journals, vol. 22(3), pages 285-297.
    • Handle: RePEc:taf:intecj:v:22:y:2008:i:3:p:285-297
    DOI: 10.1080/10168730802288125
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    References listed on IDEAS

    as
    1. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
    2. Yin-Wong Cheung & Menzie D. Chinn, 1999. "Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders," NBER Working Papers 7417, National Bureau of Economic Research, Inc.
    3. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
    4. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    5. Richard Meese & Andrew K. Rose, 1996. "Exchange rate instability: determinants and predictability," Proceedings, Federal Reserve Bank of San Francisco, pages 183-205.
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    Cited by:

    1. Rosaria Canale & Ugo Marani, 2015. "Current account and fiscal imbalances in the Eurozone: Siamese twins in an asymmetrical currency union," International Economics and Economic Policy, Springer, vol. 12(2), pages 189-203, June.

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