PREDICTING EXCHANGE-RATE CRISES - MEXICO REVISITED

This paper predicts ex ante probabilities of currency crises and sizes of expected devaluations month by month for Mexico between 1980 and 1 986. The forces contributing to speculative attacks on the Mexican pes o include domestic fiscal and monetary shocks, external credit shocks and relative price shocks. Reducing domestic credit growth, increasing the uncertainty surrounding this growth, and reducing the size and pe rhaps increasing the frequency of currency realignments might have gre atly reduced the amount of currency speculation against the peso betwe en 1980 and 1986. Anticipated external credit supply shocks played a r elatively minor role during Mexico's balance-of-payments crises.