The two key factors that trigger speculative attacks on emerging market currencies are
A)deterioration in bank balance sheets and severe fiscal imbalances.
B)deterioration in bank balance sheets and low interest rates abroad.
C)low interest rates abroad and severe fiscal imbalances.
D)low interest rates abroad and rising asset prices.

Question

Quizplus · Accepted Answer

Deterioration in bank balance sheets and severe fiscal imbalances are key factors that can trigger speculative attacks on emerging market currencies. Deterioration in bank balance sheets can indicate underlying financial instability, making the currency more vulnerable to speculation. Severe fiscal imbalances suggest that the government may have difficulty meeting its obligations, which can also lead to a loss of confidence and speculative attacks.

The Two Key Factors That Trigger Speculative Attacks on Emerging