Currency crises

Reuven Glick and Michael Hutchison

No 2011-22, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: A currency crisis is a speculative attack on the foreign exchange value of a currency, resulting in a sharp depreciation or forcing the authorities to sell foreign exchange reserves and raise domestic interest rates to defend the currency. This article discusses analytical models of the causes of currency and associated crises, presents basic measures of the incidence of crises, evaluates the accuracy of empirical models in predicting crises, and reviews work measuring the consequences of crises on the real economy. Currency crises have large measurable costs on the economy, but our ability to predict the timing and magnitude of crises is limited by our theoretical understanding of the complex interactions between macroeconomic fundamentals, investor expectations and government policy.

Keywords: Capital movements; Foreign exchange (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2011-22

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