Policy Inconsistencies and the Political Economy of Currency Crises

Puspa Amri () and Thomas D. Willett ()
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Thomas D. Willett: Department of Economics, Claremont Graduate University, Claremont McKenna College, Claremont Institute for Economic Policy Studies, 170 E. 10th Street, Claremont, CA 91711, USA

Journal of International Commerce, Economics and Policy (JICEP), 2017, vol. 08, issue 01, 1-24

Abstract: Formal models of currency crises have shown that inconsistencies between countries' domestic and exchange rate policies are a major cause of currency crises. To understand why such prolonged inconsistencies exist, we need to go beyond standard economic models and take political economy and behavioral considerations into account. We sketch out ways in which such considerations can be taken into account and highlight recent research that is useful for this project. We also offer some directions for future research and a brief guide to the empirical identification of currency crises and to the measurements of some of the relevant political and economic policy variables.

Keywords: Currency crises; financial crises; political economy; capital inflows; crisis indicators (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S1793993317500041

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