Template-Type: ReDIF-Paper 1.0
Author-Name: Gyula Barabás (ed.)
Author-X-Name-First: Gyula
Author-X-Name-Last: Barabás
Author-Email: barabasgy@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Csaba Balogh
Author-X-Name-First: Csaba
Author-X-Name-Last: Balogh
Author-Email: baloghcs@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Tamás Czeti
Author-X-Name-First: Tamás
Author-X-Name-Last: Czeti
Author-Email: czetit@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Szilárd Erhart
Author-X-Name-First: Szilárd
Author-X-Name-Last: Erhart
Author-Email: 
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Zsolt Érsek
Author-X-Name-First: Zsolt
Author-X-Name-Last: Érsek
Author-Email: ersekzs@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: András Kármán
Author-X-Name-First: András
Author-X-Name-Last: Kármán
Author-Email: karmana@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Gergely Kóczán
Author-X-Name-First: Gergely
Author-X-Name-Last: Kóczán
Author-Email: 
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Róbert Rékási
Author-X-Name-First: Róbert
Author-X-Name-Last: Rékási
Author-Email: rekasir@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank

Title: Coping with the speculative attack against the forint's band

Abstract: On 15 and 16 January 2003, an intensive speculative attack was launched against the exchange rate band of the forint. This study analyses the monetary policy decisions with regard to the antecedents of the speculation, the events of the speculative episode and the subsequent period of consolidation. The study finds that the speculative attack was irrational and unjustified in view of several considerations. Through adjustments in the policy rate and the modification of monetary instruments, the MNB was able to defend the exchange rate band of the forint. The MNB successfully localized the effects of the speculative attack on the interbank market. The MNB’s presence on the foreign exchange market facilitated the rapid and controlled withdrawal of the speculative capital, without threatening the disinflation process and the stability of the financial system. The investors taking part in the speculation incurred substantial losses, while the market developments after the speculative episode increased the banking system’s profit.

Length: 34 pages
Creation-Date: 2003
File-URL: http://www.mnb.hu/letoltes/bs2003-3.pdf
File-Format: Application/pdf

Number: 2003/3
Classification-JEL: G18, E44,E52, E65.
Keywords: financial markets, speculative attack, exchange rate, speculative episode.
Handle: RePEc:mnb:backgr:2003/3