Perspectives on the Recent Currency Crisis Literature

Robert Flood () and Nancy Marion ()

No 6380, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In the 1990s, currency crises in Europe, Mexico and Southeast Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates. To improve our understanding of these events, researchers have undertaken new theoretical and empirical work. In this paper, we provide some perspective on this work and relate it to earlier research in the area. Then we derive the optimal commitment to a fixed exchange rate and propose a common framework for analyzing currency crises that draws from both the early first-generation work and the more recent second-generation approach. The cross-generational framework stresses the important role of speculators and also recognizes that the government's commitment to a fixed exchange rate is constrained by other policy goals. In the final section we study the crisis prediction literature and find that some crises may be particularly difficult to predict using currently popular methods.

JEL-codes: F32 (search for similar items in EconPapers)
Date: 1998-01
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (132)

Published as International Journal of Finance & Economics, Vol. 4, no. 1 (January 1999): 1-26

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