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Managing Currency Crises in Emerging Markets$
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Michael P. Dooley and Jeffrey A. Frankel

Print publication date: 2003

Print ISBN-13: 9780226155401

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226155425.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 22 October 2019

Does It Pay to Defend against a Speculative Attack?

Does It Pay to Defend against a Speculative Attack?

Chapter:
(p.61) 3 Does It Pay to Defend against a Speculative Attack?
Source:
Managing Currency Crises in Emerging Markets
Author(s):
Barry Eichengreen, Andrew K. Rose
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226155425.003.0005

This chapter compares the behavior of failed and successful defenses of pegged exchange rates. It shows that the costs of unsuccessful defense against an attack on a currency system are large, about one year of economic growth or three percent of gross national product. The analysis also reveals that the difference in output losses between successful and unsuccessful defense is only significant for just one year. This finding can help account for a number of observations about the behavior of open economies and their policy makers.

Keywords:   pegged exchange rates, economic growth, gross national product, output losses, open economies

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