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Are twin currency and debt crises special?

  • Herz, Bernhard
  • Bauer, Christian
  • Karb, Volker

We show theoretically and empirically that twin currency and debt crises should be treated as a particular crisis type. Twin currency and debt crises differ from both pure currency and pure debt crises in their determinants, the course of the crises, and their economic consequences. We find that each crises type has a unique set of macroeconomic causes. We also uncover internal contagion and selection bias effects which may lead to biased results if twin crises are not treated separately. Such a separation considerably improve the efficiency of early warning systems especially on debt and twin crises.

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File URL: https://www.econstor.eu/bitstream/10419/19839/1/Herz.pdf
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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2006 with number 11.

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Date of creation: 2006
Handle: RePEc:zbw:gdec06:4734
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  1. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
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  8. Glick, R. & Hutchison, M., 1999. "Banking and Currency Crises: How Common are Twins?," Papers pb99-07, Economisch Institut voor het Midden en Kleinbedrijf-.
  9. Komulainen, Tuomas & Lukkarila, Johanna, 2003. "What drives financial crises in emerging markets?," BOFIT Discussion Papers 5/2003, Bank of Finland, Institute for Economies in Transition.
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  11. Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, World Bank Group, vol. 16(2), pages 151-170, August.
  12. Eichengreen Barry, 2002. "International Financial Crises: Is the Problem Growing?," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 43(1), pages 89-104, June.
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  15. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
  16. Tuomas Komulainen & ) & Johanna Lukkarila, 2003. "What drives financial crises in emerging markets?," Macroeconomics 0304010, EconWPA.
  17. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
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  19. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
  20. Axel Dreher & Bernhard Herz & Volker Karb, 2004. "Is There a Causal Link between Currency and Debt Crises?," International Finance 0404005, EconWPA, revised 16 Feb 2005.
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  29. repec:dgr:rugccs:200506 is not listed on IDEAS
  30. KOMULAINEN Tuomas LUKKARILA Johanna, "undated". "What Drives Financial Crises in Emerging Markets?," EcoMod2003 330700082, EcoMod.
  31. Reinhart, Carmen M. & Rogoff, Kenneth S., 2004. "Serial Default and the “Paradox†of Rich-to-Poor Capital Flows," Scholarly Articles 11129182, Harvard University Department of Economics.
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