Advanced Search
MyIDEAS: Login to save this paper or follow this series

Government Finance in the Wake of Currency Crises

Contents:

Author Info

  • Craig Burnside
  • Martin Eichenbaum
  • Sergio Rebelo

Abstract

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 equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w9786.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9786.

as in new window
Length:
Date of creation: Jun 2003
Date of revision:
Publication status: published as Burnside, Craig, Martin Eichenbaum and Sergio Rebelo. "Government Finance In The Wake Of Currency Crises," Journal of Monetary Economics, 2006, v53(3,Apr), 401-440.
Handle: RePEc:nbr:nberwo:9786

Note: EFG IFM ME PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "On the fiscal implications of twin crises," Working Paper Series, Federal Reserve Bank of Chicago WP-01-02, Federal Reserve Bank of Chicago.
  2. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1999. "Prospective deficits and the asian currency crisis," Policy Research Working Paper Series 2174, The World Bank.
  3. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 43(1), pages 1-46, December.
  4. Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003. "Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(6), pages 1189-1214, September.
  5. Daniel, Betty C., 2001. "The fiscal theory of the price level in an open economy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(2), pages 293-308, October.
  6. Amartya Lahiri & Carlos A. Vegh, 2003. "Delaying the Inevitable: Interest Rate Defense and Balance of Payments Crises," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(2), pages 404-424, April.
  7. Corsetti, Giancarlo & Mackowiak, Bartosz Adam, 2001. "Nominal Debt and the Dynamics of Currency Crises," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2929, C.E.P.R. Discussion Papers.
  8. Persson, Mats & Persson, Torsten & Svensson, Lars E O, 1996. "Debt, Cash Flow and Inflation Incentives: A Swedish Example," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1488, C.E.P.R. Discussion Papers.
  9. Dooley, Michael P. & Frankel, Jeffrey A. (ed.), 2003. "Managing Currency Crises in Emerging Markets," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226155401, March.
  10. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "Modeling Exchange-Rate Passthrough After Large Devaluations," NBER Working Papers 11638, National Bureau of Economic Research, Inc.
  11. Ariel Burstein & Martin Eichenbaum & Sergio T. Rebelo, 2002. "Why Are Rates of Inflation So Low After Large Devaluations?," RCER Working Papers 486, University of Rochester - Center for Economic Research (RCER).
  12. Corsetti, Giancarlo & Dedola, Luca, 2003. "Macroeconomics of International Price Discrimination," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3710, C.E.P.R. Discussion Papers.
  13. Jeanne, Olivier, 1999. "Currency Crises: A Perspective on Recent Theoretical Developments," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2170, C.E.P.R. Discussion Papers.
  14. van Wijnbergen, Sweder, 1985. "Fiscal Deficits, Exchange Rate Crises and Inflation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 87, C.E.P.R. Discussion Papers.
  15. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis?," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 343, Bank of Italy, Economic Research and International Relations Area.
  16. Michael P. Dooley & Jeffrey A. Frankel, 2003. "Managing Currency Crises in Emerging Markets," NBER Books, National Bureau of Economic Research, Inc, number dool03-1, October.
  17. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer, Springer, vol. 4(3), pages 381-99.
  18. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "Large Devaluations and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(4), pages 742-784, August.
  19. John H. Cochrane, 1998. "Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level," NBER Working Papers 6771, National Bureau of Economic Research, Inc.
  20. V. V. Chari & Patrick J. Kehoe, 2003. "Hot Money," Levine's Bibliography 506439000000000415, UCLA Department of Economics.
  21. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  22. Daniel, Betty C, 2001. "A Fiscal Theory of Currency Crises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 969-88, November.
  23. Maurice Obstfeld, 1986. "Speculative Attack and the External Constraint in a Maximizing Model of the Balance of Payments," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 19(1), pages 1-22, February.
  24. Morris, Stephen, 1995. "Inflation dynamics and the parallel market for foreign exchange," Journal of Development Economics, Elsevier, Elsevier, vol. 46(2), pages 295-316, April.
  25. Carlos A. Rodríguez, 1991. "The Macroeconomic Effects of Public Sector Deficits: Argentina," CEMA Working Papers: Serie Documentos de Trabajo. 76, Universidad del CEMA.
  26. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
  27. Dupor, Bill, 2000. "Exchange rates and the fiscal theory of the price level," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(3), pages 613-630, June.
  28. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, Elsevier, vol. 17(1-2), pages 1-13, August.
  29. Drazen, Allan & Helpman, Elhanan, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(4), pages 835-55, November.
  30. Sargent, Thomas J & Wallace, Neil, 1973. "The Stability of Models of Money and Growth with Perfect Foresight," Econometrica, Econometric Society, Econometric Society, vol. 41(6), pages 1043-48, November.
  31. Calvo, Guillermo A, 1987. "Balance of Payments Crises in a Cash-in-Advance Economy," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 19(1), pages 19-32, February.
  32. Easterly, William & Schmidt-Hebbel, Klaus, 1991. "The macroeconomics of public sector deficits : a synthesis," Policy Research Working Paper Series 775, The World Bank.
  33. Feenstra, Robert C, 1985. "Anticipated Devaluations, Currency Flight, and Direct Trade Controls in a Monetary Economy," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 386-401, June.
  34. Sergio Rebelo & Carlos A. Vegh, 2006. "When Is It Optimal to Abandon a Fixed Exchange Rate?," NBER Working Papers 12793, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Canadian Macro Study Group

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9786. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.