The paper argues that capital inflows into higher inflation countries and falling interest rates differentials can coexist with the expectation of a realignment, provided international investors are confident in their "exit speed", i.e., in their ability to close or hedge open positions in good time. The covered interest rate parity is inapplicable, it is maintained, to all cases in which the monetary authorities' expected behaviour is such as to justify the aforsid confidence.
Credibility or "Exit Speed"? Reflections prompted by the 1992 EMS crisis / Simonazzi, Annamaria; Vianello, Fernando. - In: RIVISTA ITALIANA DEGLI ECONOMISTI. - ISSN 1593-8662. - STAMPA. - 1:1(1996), pp. 5-24.
Credibility or "Exit Speed"? Reflections prompted by the 1992 EMS crisis
SIMONAZZI, Annamaria;VIANELLO, Fernando
1996
Abstract
The paper argues that capital inflows into higher inflation countries and falling interest rates differentials can coexist with the expectation of a realignment, provided international investors are confident in their "exit speed", i.e., in their ability to close or hedge open positions in good time. The covered interest rate parity is inapplicable, it is maintained, to all cases in which the monetary authorities' expected behaviour is such as to justify the aforsid confidence.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
