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A Crisis Transmission Channel for Reserve Currency Countries: A Cautionary Tale

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  • Victoria Miller

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Abstract

World financial markets have been in turmoil as investors grapple with the possibility that Greece and perhaps Italy, Ireland, Portugal and Spain will default on their debts. The 2011 downgrade of the S&P outlook for US debt to “negative” suggests that there may eventually be concerns that the US will go the way of Europe. The paper studies possible transmission effects of a crisis for reserve-currency debt which may occur via central bank holdings of reserve-currency debt. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Victoria Miller, 2014. "A Crisis Transmission Channel for Reserve Currency Countries: A Cautionary Tale," Open Economies Review, Springer, vol. 25(4), pages 809-818, September.
  • Handle: RePEc:kap:openec:v:25:y:2014:i:4:p:809-818
    DOI: 10.1007/s11079-013-9292-6
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    File URL: http://hdl.handle.net/10.1007/s11079-013-9292-6
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    References listed on IDEAS

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    1. Miller, V., 1998. "Domestic bank runs and speculative attacks on foreign currencies," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 331-338, April.
    2. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-484, December.
    3. Kristin J. Forbes, 2002. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 77-132 National Bureau of Economic Research, Inc.
    4. Victoria Miller & Luc Vallée, 2011. "Central Bank Balance Sheets and the Transmission of Financial Crises," Open Economies Review, Springer, vol. 22(2), pages 355-363, April.
    5. McKinnon, Ronald I. & Pill, Huw, 1998. "International Overborrowing: A Decomposition of Credit and Currency Risks," World Development, Elsevier, vol. 26(7), pages 1267-1282, July.
    6. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2001. "Hedging and financial fragility in fixed exchange rate regimes," European Economic Review, Elsevier, vol. 45(7), pages 1151-1193.
    7. Victor E. Vaugirard, 2004. "Informational Contagion of Sudden Stops in a Global Games Framework," Open Economies Review, Springer, vol. 15(2), pages 169-192, April.
    8. Miller, Victoria & Vallée, Luc, 2010. "The size of banking crises in credible fixed exchange rate regimes," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1226-1236, November.
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    Citations

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    Cited by:

    1. Yanping Zhao & Jakob Haan & Bert Scholtens & Haizhen Yang, 2014. "Leading Indicators of Currency Crises: Are They the Same in Different Exchange Rate Regimes?," Open Economies Review, Springer, vol. 25(5), pages 937-957, November.
    2. Ryota Nakatani, 2016. "Twin Banking and Currency Crises and Monetary Policy," Open Economies Review, Springer, vol. 27(4), pages 747-767, September.
    3. Victoria Miller & Luc Vallée, 2016. "Unconventional Bank Bailouts in Fixed Exchange Rate Regimes," Open Economies Review, Springer, vol. 27(1), pages 39-49, February.

    More about this item

    Keywords

    Currency crisis; Self-justifying bank runs; Bailouts; Insolvency; F3; G2;

    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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