High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...

High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...

Applying basic statistical methods to a large sample of currency crises, it is shown that a variety of measures of monetary policy are significantly related to the outcome of a speculative attack. Unlike in the comparable study of Kraay (1999), discount rates have a significant but...