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The Relationship between Fiscal Sustainability and Currency Crises in Some Selected Countries

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  • Cruz-Rodríguez Alexis

    () (Pontificia Universidad Católica Madre y Maestra, Av. Abraham Lincoln Esq. Rómulo Betancourt, Ensanche La Julia, Santo Domingo, Dominican Republic)

Abstract

The aim of this article is to assess whether a Fiscal Sustainability Indicator (FSI) can be used to predict the probability that a currency crisis occurs. The FSI developed by Croce and Juan-Ramón (2003) is employed. Two different definitions for currency crises are used to evaluate whether they induce different results in the analysis. In general, the results suggest that the lagged FSI has an explanatory power over currency crises in some countries.

Suggested Citation

  • Cruz-Rodríguez Alexis, 2013. "The Relationship between Fiscal Sustainability and Currency Crises in Some Selected Countries," Review of Economic Perspectives, De Gruyter Open, vol. 13(4), pages 176-194, December.
  • Handle: RePEc:vrs:reoecp:v:13:y:2013:i:4:p:176-194:n:2
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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