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Government Finance in the Wake of Currency Crises

  • Craig Burnside
  • Martin Eichenbaum
  • Sergio Rebelo

This paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different financing methods for post-crisis rates of inflation and depreciation? We study these questions using a general equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9786.

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Date of creation: Jun 2003
Date of revision:
Publication status: published as Burnside, Craig, Martin Eichenbaum and Sergio Rebelo. "Government Finance In The Wake Of Currency Crises," Journal of Monetary Economics, 2006, v53(3,Apr), 401-440.
Handle: RePEc:nbr:nberwo:9786
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