Speculative Attacks, Forward Market Intervention and the Classic Bear Squeeze

Download or read book Speculative Attacks, Forward Market Intervention and the Classic Bear Squeeze written by Mr.Subir Lall and published by International Monetary Fund. This book was released on 1997-12-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: A typical strategy used by speculators to launch an attack on a fixed exchange regime is the use of forward markets. Central banks also intervene in forward markets to counter speculation. This paper addresses the question of how an attack is launched on the forward market, and what the optimal policy response to such speculation is in the forward and spot markets. The paper also demonstrates how central banks can impose a bear squeeze on speculators. Recent events in South East Asian currency markets are interpreted within the framework of the model’s predictions.