Budget Deficits and Exchange-Rate Crises

Barbara Annicchiarico (), Giancarlo Marini and Giovanni Piersanti

International Economic Journal, 2011, vol. 25, issue 2, 285-303

Abstract: This paper investigates currency crises in an optimizing general equilibrium model with overlapping generations. It is shown that a rise in government budget deficits financed by future taxes generates a decumulation of external assets, leading up to a speculative attack and forcing the monetary authorities to abandon the peg.

Keywords: Budget deficits; foreign exchange reserves; currency crises (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:25:y:2011:i:2:p:285-303

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DOI: 10.1080/10168737.2010.504779

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