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How such a revaluation crisis or in?ow attack might operate

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In 1961, Germany faced the dilemma of an external surplus and a booming economy. As a result, speculative capital ?owed into Germany and the Germans felt obliged to revalue their currency (rather than to devalue it). Can you describe how such a "revaluation crisis" or "in?ow attack" might operate when the government (like Germany's at the time) is highly fearful of in?ation? The reasoning is different from that underlying the devaluation crisis discussed, because interest rates are pushed down by speculators and there is no danger of running out of foreign reserves.

Reference no: EM13868835

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