Nominal Debt and the Dynamics of Currency Crises

Giancarlo Corsetti and Bartosz Maćkowiak

No 28516, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: We study the interaction of fiscal and monetary policies during a currency crisis in an economy with government nominal liabilities. We show that the stock and maturity of these liabilities are key determinants of the magnitude, timing and predictability of a devaluation. Among notable features of our model, monetary authorities defend the currency parity conditional on the level of the interest rate, rather than on the stock of international reserves; budget deficits need not be high before a currency crisis; postdevaluation inflation may exhibit little persistence, and money demand need not fall after the crisis.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 35
Date: 2000
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Nominal Debt and the Dynamics of Currency Crises (2001)
Working Paper: Nominal Debt and the Dynamics of Currency Crises (2000)
Working Paper: Nominal Debt and the Dynamics of Currency Crises (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:28516

DOI: 10.22004/ag.econ.28516

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