Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18084
Authors: 
Alvarez-Plata, Patricia
Schrooten, Mechthild
Year of Publication: 
2003
Series/Report no.: 
DIW Discussion Papers 348
Abstract: 
Despite the fact that Argentina has been suffering from a recession for years, the timing and severity of the recent currency crisis surprised most observers. This paper analyzes the role of fundamentals and self-fulfilling speculation in the Argentinean crisis. Arguing within a theoretical model of a fixed exchange rate system that allows for multiple equilibria, we show that the crisis, while being associated with weak and deteriorating fundamentals, cannot be explained by these macroeconomic factors alone. Estimating a univariate Markovswitching model, this paper shows that shifts in agents? beliefs did indeed also play a crucial role.
Subjects: 
Currency crises
Self-fulfilling speculation
Markov-switching models
JEL: 
F36
F31
C22
Document Type: 
Working Paper

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