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| Antonio Doblas-Madrid |
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| ''Implications of within-period timing in models of speculative attack'' |
| ( 2007, Vol. 6 No.28 ) |
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| 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. |
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| Keywords: |
JEL: F3 - International Finance: General
E4 - Money and Interest Rates: General |
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| Manuscript Received : Mar 01 2007 | | Manuscript Accepted : Aug 02 2007 |
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