SpeculationSpeculation

SpeculationSpeculation

Stabilising speculation

(a) Initial price fall

Stabilising speculation

(a) Initial price fall

Stabilising speculation: initial price fallStabilising speculation: initial price fall

P1

P

Q O

S1

D1

a

Stabilising speculation: initial price fallStabilising speculation: initial price fall

P1

P2

P

Q O

D2

a

b

S1

D1

S2

D3

Stabilising speculation: initial price fallStabilising speculation: initial price fall

P1

P2

P

Q O

P3

D2

a

b

c

S1

D1

SpeculationSpeculation

Stabilising speculation

(b) Initial price rise

Stabilising speculation

(b) Initial price rise

Stabilising speculation: initial price riseStabilising speculation: initial price rise

P1

P

Q O

S1

D1

a

Stabilising speculation: initial price riseStabilising speculation: initial price rise

P1

P2

P

Q O

S1

D1

D2

a

b

Stabilising speculation: initial price riseStabilising speculation: initial price rise

P1

P2

P

Q O

P3

S1

S2

D1

D2

a

b

D3

c

SpeculationSpeculation

Destabilising speculation

(a) Initial price fall

Destabilising speculation

(a) Initial price fall

Destabilising speculation: initial price fallDestabilising speculation: initial price fall

P1

P

Q O

S1

D1

a

Destabilising speculation: initial price fallDestabilising speculation: initial price fall

P1

P2

P

Q O

S1

D1

D2

a

b

Destabilising speculation: initial price fallDestabilising speculation: initial price fall

P1

P2

P

Q O

P3

S1

S2

D1

D2

a

b

D3

c

SpeculationSpeculation

Destabilising speculation

(b) Initial price rise

Destabilising speculation

(b) Initial price rise

Destabilising speculation: initial price riseDestabilising speculation: initial price rise

P1

P

Q O

S1

D1

a

Destabilising speculation: initial price riseDestabilising speculation: initial price rise

P1

P2

P

Q O

S1

D1

D2

a

b

Destabilising speculation: initial price riseDestabilising speculation: initial price rise

P1

P2

P

Q O

P3

S1

S2

D1

D2

a

b

D3

c

Exchange rate speculation:

Stabilising speculation (Initial depreciation)

Exchange rate speculation:

Stabilising speculation (Initial depreciation)

SpeculationSpeculation

O

Exc

ha

nge

ra

te

Quantity of £s

S3

D3

er3

er2

S2

D2

er1

S1

D1

Stabilising speculationStabilising speculation

Exchange rate speculation:

Destabilising speculation (Initial depreciation)

Exchange rate speculation:

Destabilising speculation (Initial depreciation)

SpeculationSpeculation

O

Exc

ha

nge

ra

te

Quantity of £s

S2

D2

er2

er3

S3

D3

er1

S1

D1

Destabilising speculationDestabilising speculation