A currency crisis is defined as a speculative attack on
the foreign exchange value of a currency, resulting in a
sharp depreciation or forcing the authorities to sell foreign exchange reserves and raise domestic interest rates
to defend the currency. Currency crises are highly correlated with ‘sudden stops,’ that is, a sharp reversal in cap-
ital flows. ‘Models of Currency Crises’ by Glick and
Hutchinson discusses analytical models of the causes
of currency (and associated) crises, presents basic measures of the incidence of crises, evaluates the accuracy
of empirical models in predicting them, and reviews
work measuring the consequences of crises on the real
economy.
One of
A currency crisis is defined as a speculative attack onthe foreign exchange value of a currency, resulting in asharp depreciation or forcing the authorities to sell foreign exchange reserves and raise domestic interest ratesto defend the currency. Currency crises are highly correlated with ‘sudden stops,’ that is, a sharp reversal in cap-ital flows. ‘Models of Currency Crises’ by Glick andHutchinson discusses analytical models of the causesof currency (and associated) crises, presents basic measures of the incidence of crises, evaluates the accuracyof empirical models in predicting them, and reviewswork measuring the consequences of crises on the realeconomy.One of
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