An iron law of currency crisis: the divergence of the nominal and the real exchange rate and increasing current account deficits

Horst Siebert

No 1106, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The currency crises of the 1990s all exhibit a divergence of the nominal and the real exchange rate together with an increase in the negative current account. The nominal rate does not reflect inflation differences fully and the ensuing real appreciation leads to a negative current account. This pattern holds for the Czech, the Mexican, Brazilian, Argentinian as well as the South Korean currency crises. It seems to be an iron law of currency crises.

Keywords: real exchange rate; devaluation; currency crisis (search for similar items in EconPapers)
JEL-codes: E0 F3 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1106

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