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Government Finance in the Wake of Currency Crises

  • Craig Burnside
  • Martin Eichenbaum

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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File URL: http://repec.org/sed2005/up.6599.1106934135.pdf
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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 429.

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Date of creation: 2005
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Handle: RePEc:red:sed005:429
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. John H. Cochrane, 1998. "Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level," CRSP working papers 478, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  30. repec:ucp:bknber:9780226155401 is not listed on IDEAS
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