New framework reveals speculators' key role in predicting currency crises!
Currency crises in the 1990s brought attention to attacks on government exchange rates. New research has been done to understand these events better. The optimal commitment to a fixed exchange rate has been derived, and a common framework for analyzing currency crises has been proposed. This framework combines older and newer approaches, emphasizing the role of speculators and the government's constraints. Some currency crises are hard to predict using current methods.