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Currency Crises in Developed and Emerging Market Economies; A Comparative Empirical Treatment

  • Thomson Fontaine
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    This paper takes a step in empirically testing the implications of a number of theoretical models that attempt to highlight the dynamics behind currency crises. By focusing on countries with broadly disparate economic and political arrangements, the study attempts to determine the extent to which these variables matter in affecting the probabilities of currency crises occurring. The empirical findings provide support for the view that, in general, a deterioration in economic fundamentals and the pursuit of lax monetary policy can contribute to currency crises. The experiences of several emerging market economies suggests that the sustainability of exchange rate policy depends both on adequate policy responses to the shocks to the economy and on the fragility of the economic, financial, and political system.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17849
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/13.

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    Length: 35
    Date of creation: 01 Jan 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/13
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    15. Blackburn, Keith & Sola, Martin, 1993. " Speculative Currency Attacks and Balance of Payments Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 7(2), pages 119-44, June.
    16. Frankel, Jeffrey A & Rose, Andrew K, 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," CEPR Discussion Papers 1349, C.E.P.R. Discussion Papers.
    17. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November.
    18. W.H. Buiter & G Corsetti & P Pesenti, 1995. "A Center-Periphery Model of Monetary Coordination and Exchange Rate Crises," CEP Discussion Papers dp0246, Centre for Economic Performance, LSE.
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    21. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    22. Garber, Peter M, 1990. "Famous First Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 35-54, Spring.
    23. Inci Ötker & Ceyla PazarbaÅŸioÄlu, 1996. "Speculative attacks and currency crises: The Mexican experience," Open Economies Review, Springer, vol. 7(1), pages 535-552, March.
    24. Masson, Paul R, 1995. "Gaining and Losing ERM Credibility: The Case of the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(430), pages 571-82, May.
    25. Catherine A. Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? a Test," IMF Working Papers 98/154, International Monetary Fund.
    26. Stephen W. Salant & Dale W. Henderson, 1976. "Market anticipations, government policy, and the price of gold," International Finance Discussion Papers 81, Board of Governors of the Federal Reserve System (U.S.).
    27. Gilda Fernandez & Cem Karacadag & Rupa Duttagupta, 2004. "From Fixed to Float; Operational Aspects of Moving towards Exchange Rate Flexibility," IMF Working Papers 04/126, International Monetary Fund.
    28. Michael D. Bordo & Anna J. Schwartz, 1996. "Why Clashes Between Internal and External Stability Goals End in Currency Crises, 1797-1994," NBER Working Papers 5710, National Bureau of Economic Research, Inc.
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    30. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    31. Ozkan, F Gulcin & Sutherland, Alan, 1995. "Policy Measures to Avoid a Currency Crisis," Economic Journal, Royal Economic Society, vol. 105(429), pages 510-19, March.
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