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Government Finance in the Wake of Currency Crises

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  • Craig Burnside
  • Martin Eichenbaum

Abstract

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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Suggested Citation

  • Craig Burnside & Martin Eichenbaum, 2005. "Government Finance in the Wake of Currency Crises," 2005 Meeting Papers 429, Society for Economic Dynamics.
  • Handle: RePEc:red:sed005:429
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    References listed on IDEAS

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    More about this item

    Keywords

    Currency crisis; banking crisis; speculative attacks; seigniorage; fiscal reform; bailouts;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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