This paper investigates currency and financial crises in an optimizing general equilibrium model. It is shown that a rise in current and expected future budget deficits generates a real exchange rate appreciation and a decumulation of external assets, leading up to a currency crisis when foreign reserves approximate a critical level. Strong empirical support for our model is obtained by a probit estimation for Latin American and Asian countries.

Piersanti, G., Marini, G. (2003). Fiscal deficits and currency crises.

Fiscal deficits and currency crises

MARINI, GIANCARLO
2003-05-01

Abstract

This paper investigates currency and financial crises in an optimizing general equilibrium model. It is shown that a rise in current and expected future budget deficits generates a real exchange rate appreciation and a decumulation of external assets, leading up to a currency crisis when foreign reserves approximate a critical level. Strong empirical support for our model is obtained by a probit estimation for Latin American and Asian countries.
en
budget deficits
foreign exchange reserves
currency crises
Piersanti, G., Marini, G. (2003). Fiscal deficits and currency crises.
Piersanti, G; Marini, G
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/74
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