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Models of Currency Crises with Self-Fulfilling Features

  • Maurice Obstfeld

The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency-market equilibria. After describing an illustrative model in which high unemployment may cause an exchange- rate crisis with self-fulfilling features, the paper reviews some other self-reinforcing mechanisms. Recent econometric evidence seems to support the practical importance of these mechanisms.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5285.

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Date of creation: Oct 1995
Date of revision:
Publication status: published as European Economic Review, vol. 40, pp. 1037-1047, 1996.
Handle: RePEc:nbr:nberwo:5285
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  19. de Kock, Gabriel & Grilli, Vittorio, 1993. "Fiscal Policies and the Choice of Exchange Rate Regime," Economic Journal, Royal Economic Society, vol. 103(417), pages 347-58, March.
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