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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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    16. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November.
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    24. Pierre-Richard Agénor & Jagdeep S. Bhandari & Robert P. Flood, 1992. "Speculative Attacks and Models of Balance of Payments Crises," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 357-394, June.
    25. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
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    29. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 219-294.
    30. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-48, September.
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