This paper investigates the effectiveness of the monetary authority's borrowing policies in resolving exchange rate crises. It shows why obtaining loans or lines of credit in foreign currency may avoid, at least temporarily, the devaluation of a fixed exchange rate, and discusses the problem of...

This paper examines credibility and reputational factors in explaining the December 1994 crisis of the Mexican peso. After reviewing events leading to the crisis, a model emphasizing the inflation-competitiveness trade-off is presented to explain the formation of devaluation expectations....

The paper presents estimates of a model of the credibility of the U.K. commitment to its central parity against the deutsche mark during the period of U.K. ERM membership (1990-92). The measure of credibility used is the long-term interest differential with Germany. Credibility is decomposed...