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Budget Deficits and Exchange-Rate Crises

Author

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  • Barbara Annicchiarico
  • Giancarlo Marini
  • Giovanni Piersanti

Abstract

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.

Suggested Citation

  • Barbara Annicchiarico & Giancarlo Marini & Giovanni Piersanti, 2011. "Budget Deficits and Exchange-Rate Crises," International Economic Journal, Taylor & Francis Journals, vol. 25(2), pages 285-303.
    • Handle: RePEc:taf:intecj:v:25:y:2011:i:2:p:285-303
    DOI: 10.1080/10168737.2010.504779
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    References listed on IDEAS

    as
    1. Turnovsky,Stephen J., 1977. "Macroeconomic Analysis and Stabilization Policy," Cambridge Books, Cambridge University Press, number 9780521291873.
    2. Frenkel, Jacob A & Razin, Assaf, 1987. "Fiscal Policies and the World Economy; An Intertemporal Approach (Cambridge, Mass.: MIT Press, 1987)," MPRA Paper 20438, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Giancarlo Marini & Giovanni Piersanti, 2003. "Fiscal Deficits and Currency Crises," CEIS Research Paper 15, Tor Vergata University, CEIS.
    2. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    3. Giancarlo Marini & Giovanni Piersanti, 2012. "Models of Speculative Attacks and Crashes in International Capital Markets," CEIS Research Paper 245, Tor Vergata University, CEIS, revised 24 Jul 2012.

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