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Why Do Currency Crises Recur?

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  • Graham Bird
  • Graham Bird
  • Graham Bird

Abstract

Argentina and Turkey experienced currency crises in 2018, having also had crises in 2001. Why do crises recur? There are three generations of model that help to explain in theory why currency crises occur, although in practice the theories need to be amalgamated. The recurrence of currency crises implies that either appropriate lessons have not been learnt or, for some reason, countries have been unable to convert learning into actions. Key lessons are first, avoid excessively large fiscal deficits, rapid credit creation and debt accumulation, and second, reduce economic and financial vulnerability and create better insulation from external shocks. Empirical analysis shows that the causes of the crises in Argentina and Turkey in 2018 were different from those in 2001.

Suggested Citation

  • Graham Bird & Graham Bird & Graham Bird, 2019. "Why Do Currency Crises Recur?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 20(2), pages 149-182, April.
    • Handle: RePEc:wej:wldecn:747
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