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Are twin currency and debt crises special?

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  • Herz, Bernhard
  • Bauer, Christian
  • Karb, Volker

Abstract

We show theoretically and empirically that twin currency and debt crises should be treated as a particular crisis type. Twin currency and debt crises differ from both pure currency and pure debt crises in their determinants, the course of the crises, and their economic consequences. We find that each crises type has a unique set of macroeconomic causes. We also uncover internal contagion and selection bias effects which may lead to biased results if twin crises are not treated separately. Such a separation considerably improve the efficiency of early warning systems especially on debt and twin crises. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2006 with number 11.

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Date of creation: 2006
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Handle: RePEc:zbw:gdec06:4734

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Cited by:
  1. Hallak, Issam, 2009. "Renegotiation and the pricing structure of sovereign bank loans: Empirical evidence," Journal of Financial Stability, Elsevier, vol. 5(1), pages 89-103, January.
  2. Bauer, Christian & Herz, Bernhard & Hoops, Stefan, 2008. "A Cheap Lunch for Emerging Markets: Removing International Financial Market Imperfections with Modern Financial Instruments," World Development, Elsevier, vol. 36(9), pages 1514-1530, September.

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