{
  "title": "The Mexican Peso Crisis: Overview and Analysis of Credibility Factors",
  "publication": "IMF Working Papers, January 1, 1996",
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  "summary": "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.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- This paper examines credibility and reputational factors in explaining the December 1994 crisis of the Mexican peso.\n- After reviewing events leading to the crisis, a model emphasizing the inflation-competitiveness trade-off is presented to explain the formation of devaluation expectations.\n- Estimation results indicate that investors appear to have seriously underestimated the risk of devaluation, despite early warning signals.\n- The collapse of confidence that followed the December 20 devaluation may have been the result of a shift in the perceived commitment of the authorities to exchange rate stability."
    },
    {
      "heading": "Model and Analytical Framework",
      "content": "- Emphasis on an inflation-competitiveness trade-off to explain formation of devaluation expectations.\n- Key concepts and keywords used in the analysis: Competition, Crawling peg, devaluation expectation, devaluation probability, devaluation rate, exchange rate, exchange rate band, Exchange rates, Inflation, inflation-competitiveness tradeoff, interest rate differential, Mexican peso, perceived devaluation risk, peso devaluation, Real exchange rates."
    },
    {
      "heading": "Empirical Findings",
      "content": "- Estimation results conclude investors underestimated devaluation risk prior to December 1994.\n- Early warning signals were present but did not prevent mispricing of devaluation probability by investors.\n- The December 20 devaluation corresponded with a collapse of confidence tied to a perceived shift in authorities' commitment to exchange rate stability.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-mexican-peso-crisis-overview-and-analysis-of-credibility-factors-1966"
    }
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    "Authors: Paul R Masson, Pierre-Richard Agénor",
    "Published: January 1, 1996",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451929096.001",
    "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.",
    "Estimation results indicate that investors appear to have seriously underestimated the risk of devaluation, despite early warning signals.",
    "The collapse of confidence that followed the December 20 devaluation may have been the result of a shift in the perceived commitment of the authorities to exchange rate stability.",
    "Emphasis on an inflation-competitiveness trade-off to explain formation of devaluation expectations.",
    "Key concepts and keywords used in the analysis: Competition, Crawling peg, devaluation expectation, devaluation probability, devaluation rate, exchange rate, exchange rate band, Exchange rates, Inflation, inflation-competitiveness tradeoff, interest rate differential, Mexican peso, perceived devaluation risk, peso devaluation, Real exchange rates.",
    "Estimation results conclude investors underestimated devaluation risk prior to December 1994.",
    "Early warning signals were present but did not prevent mispricing of devaluation probability by investors.",
    "The December 20 devaluation corresponded with a collapse of confidence tied to a perceived shift in authorities' commitment to exchange rate stability."
  ],
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