Budget Deficits and Exchange-Rate Crises
This paper investigates currency crises in an optimizing general equilibrium model with overlapping generations. It is shown that a rise in government budget deficits financed by future taxes generates a decumulation of external assets, leading up to a speculative attack and forcing the monetary authorities to abandon the peg.
Volume (Year): 25 (2011)
Issue (Month): 2 ()
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