Introduction

Björn Rother

Chapter 1 in The Determinants of Currency Crises, 2009, pp 1-6 from Palgrave Macmillan

Abstract: Abstract There are strong reasons to believe that political factors can play a role in the occurrence of currency crises. Policy makers deciding on exchange rate issues strive for their political survival in the face of political competition; base their actions on ideological preferences and the influence of special-interest groups; and should pay attention to the institutional structure in which they operate. Of course, all these considerations should be of particular relevance when the political system comes under extreme pressure, as tends to be the case in episodes of heightened currency instability. Such times of crisis typically involve difficult trade-offs between painful macroeconomic adjustment in support of the exchange rate regime in place and the often severe political, social, and economic consequences of a sudden and sharp currency depreciation.

Keywords: Exchange Rate; Real Exchange Rate; Political Factor; Exchange Rate Regime; Foreign Exchange Market (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-23364-5_1

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DOI: 10.1057/9780230233645_1

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