Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies

This paper uses non-parametric tests to provide a description of the "stylized facts" associated with episodes of speculative pressure in foreign exchange markets in Pacific Basin Economies, and to see whether these "stylized facts" appear to be broadly consistent with the alternative explanations for such episodes suggested in the theoretical literature. ; The empirical results are mixed, but some of the results are nonetheless suggestive. Episodes of depreciation appear to be associated with larger budget deficits and growth in central bank domestic credit, than episodes of appreciation or periods of tranquility, indicating that unusually expansionary or contractionary policies may contribute to speculative pressures in foreign exchange markets. There is also some evidence that episodes of speculative pressure may arise when economic conditions make it costly for the government to maintain a stable exchange rate. ; Published in FRBSF Economic Review (1995, no. 3, p 3-16)