An eclectic third generation model of financial and exchange rate crises
This paper presents an eclectic model that systematizes the dynamics of self-fulfilling crises, using the main aspects of the three typologies of third generation models, to describe the stylized facts that hasten the withdrawal of a pegged exchange rate system. The most striking contributions are the implications for economic policy as well the vanishing role of exchange rate as an instrument of macroeconomic adjustment, when balance-sheet effects are a real possibility.
|Date of creation:||2008|
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- Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2000.
"A simple model of monetary policy and currency crises,"
European Economic Review,
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