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Government Finance in the Wake of Currency Crises


  • Craig Burnside

    (University of Virginia.)

  • Martin Eichenbaum

    (Northwestern, NBER and Federal Reserve Bank of Chicago.)

  • Sergio Rebelo

    (Northwestern, NBER and CEPR)


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).

Suggested Citation

  • Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2003. "Government Finance in the Wake of Currency Crises," RCER Working Papers 501, University of Rochester - Center for Economic Research (RCER).
  • Handle: RePEc:roc:rocher:501

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    References listed on IDEAS

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    More about this item


    Currency crisis; bnking crisis; speculative attacks; seigniorage; fiscal reform; bailouts.icity of intertemporal substitution.;

    JEL classification:

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

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    This paper has been announced in the following NEP Reports:


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