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Models of Speculative Attacks and Crashes in International Capital Markets

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Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the dominant theoretical approaches, and discuss their extensions to include the financial sector, contagion across markets and countries, capital flows and borrowing constraints, strategic interactions among agents and equilibrium selection. In the final section we focus on the relevant policy issue of crisis prevention and optimal foreign regime choice in a world of full financial integration.

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  • Giancarlo Marini & Giovanni Piersanti, 2012. "Models of Speculative Attacks and Crashes in International Capital Markets," CEIS Research Paper 245, Tor Vergata University, CEIS, revised 24 Jul 2012.
    • Handle: RePEc:rtv:ceisrp:245
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    More about this item

    Keywords

    Exchange Rate Regimes; Speculative Attacks; Currency Crises; Financial Crises; Global Games;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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