Currency crises, generally defined as rapid depreciation of a local currency or loss of foreign exchange reserves, are common incidents in modern monetary systems. Due to their repeated occurrence and severity, they have earned wide coverage by both theoretical and empirical literature. However,...

This paper investigates the dynamic implications of Krugman’s (1999) model of financial crises with balance-sheet effects, which has a considerable impact on the literature of international financial crisis. Considering explicitly the wealth-accumulation constraint and the external equilibrium...

Currency crises, generally defined as rapid depreciations of a local currency or loss of foreign exchange reserves, are common incidents in modern monetary systems. Due to their repeated occurrence and severity, they have earned wide coverage by both theoretical and empirical literature....

With heterogeneous productivity and sticky prices in the short run, exchange rate changes can generate real effects on agents in the economy; the result is that the currency regime becomes a policy variable amenable to political competition. This paper discusses how special interests and...

The purpose of this paper is to investigate whether a fiscal sustainability indicator (FSI) can be used as a leading indicator to predict currency crises. Firstly, the sustainability of the fiscal policy in 17 developing countries is analysed using a FSI developed by Croce and Juan-Ramón...

This paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different fi­nancing methods for post-crisis rates of inflation and depreciation? We study these questions using a general...

Output effects of currency crises are often estimated to be negative and persistent. A new banking crisis database allows us to construct pure currency collapses that are not associated with banking crises. The estimates show that countries facing a pure currency crisis have full recovery of...

This paper uses Granger causality tests on a fiscal sustainability indicator (FSI) and currency crises for 17 countries to evaluate the direction of causality between the FSI and currency crises. The FSI developed by Croce and Juan-Ramón (2003) is used. Also, different definitions for currency...