Perspectiveson the Recent Currency Crisis Literature
September 1, 1998
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Summary
In the 1990s, currency crises in Europe, Mexico, and Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates and have prompted researchers to undertake new theoretical and empirical analysis of these events. This paper provides some perspective on this work and relates it to earlier research. It derives the optimal commitment to a fixed exchange rate and proposes a common framework for analyzing currency crises. This framework stresses the important role of speculators and recognizes that the government’s commitment to a fixed exchange rate is constrained by other policy goals. The final section finds that some crises may be particularly difficult to predict using currently popular methods.
Subject: Conventional peg, Currencies, Currency crises, Domestic credit, Exchange rates, Financial crises, Foreign exchange, Money
Keywords: capital gain, Conventional peg, crisis literature, Currencies, Currency crises, currency crisis, currency depreciation, depreciation rate, Domestic credit, Europe, Exchange rates, exchange-rate authority, exchange-rate jump, exchange-rate parity, interest rate, money demand, price level, rate change, rate of exchange, shadow exchange rate, shadow exchange rate period, shadow rate, Speculative attack, WP
Pages:
51
Volume:
1998
DOI:
Issue:
130
Series:
Working Paper No. 1998/130
Stock No:
WPIEA1301998
ISBN:
9781451855166
ISSN:
1018-5941
