If you have work related to the crisis but it is not listed here, please follow the steps given at the bottom of this page to have your papers included here. The logic of currency crises maurice obstfeld working paper no. What differentiates the new currency crisis literature from the classi. Jul 15, 20 the second category of book helps readers understand the factors behind the crisis, the policy response and its aftermath.
Once one recognizes that governments borrow international reserves and exercise other policy options to defend fixed exchange rates during currency crises, the question arises. The first generation and second generation financial crisis theory finance essay. Theoretical models of currency crises are often categorized as first, second, or thirdgeneration, though many models combine elements of more than one generic form. This article was originally published in 1994 in cahiers economiques et monetaires. The new interest has also been driven, however, by the excit ing policy conclusions of new models, most of them inspired by the seminal paper of obstfeld 1994. Maurice obstfeld no 4640, nber working papers from national bureau of economic research, inc abstract.
It can be simply the result of the logic of the situation, in which holding a currency will become unattractive once its price is no longer stabi lized, and the end of the price. Other readers will always be interested in your opinion of the books youve read. National bureau of economic research, working paper series national bureau of economic research, working paper no. International finance theory and policy 10th edition. Products of common causes maurice obstfeld and kenneth rogoff november 2009 abstract this paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Gupta 1996 presents a short survey of theoretical and empirical results on currency and banking crises. Currency crises national bureau of economic research.
The dramatic currency crisis that culminated in the august. The logic of currency crises, nber working papers 4640, national bureau of economic research, inc. A currency crisis is an episode in which the exchange rate depreciates substantially during a. This paper studies the currency crisis theories, and with the help of them it finds out the main. Information dissemination in currency crises by christina. A crash course in the future of finance by nouriel roubini and stephen mihm is a nonfiction financial book. And the peg is abandoned because everybody attacked the currency. Science and education publishing, publisher of open access journals in the scientific, technical and medical fields. Permission to offer this article was granted by the bank of france to professor obstfeld in a letter dated 20 october 1998. It blends narrative and quantitative methods and connects economic outcomes to the underlying political economy of international macroeconomics. This is an incomplete reference list of economic papersbooks that are related to the current asian crisis. Empirically, the book combines analyses of crossnational survey data of voters and firms policy evaluations with comparative case studies of national policy responses to the asian financial crisis of 19978 and the recent global financial crisis in eastern europe. Financial crises and the politics of macroeconomic.
The logic of currency crises by maurice obstfeld ssrn. Rogoff, the mirage of fixed exchange rates journal of economic perspectives 9, fall 1995. What are the implications of the escape clause model. There is no universally accepted definition of a currency crisis, but most would agree that they all involve one key element. Rational and selffulfilling balanceofpayments crises jstor. No 4640, nber working papers from national bureau of economic research, inc abstract. Paul krugman is the ford international professor of economics at the massachusetts institute of technology and a research associate of the national bureau of economic research. The asian financial crisis of 1997 is another wellknown example of a currency crisis. The dramatic currency crisis that culminated in the august 1993 widening of exchangerate bands.
As such, sensemaking is about making the intractable actionable. We identify the benefits and costs of financial openness in terms of currency crises based on a novel. Explain the three generations of currency crises models. Table of contents i the classical currency crisis models. Models of currency crises with selffulfilling features sciencedirect. Whether youve loved the book or not, if you give your honest and detailed thoughts then people will find new books that are right for them. Integration, crisis, and growth japanus center ufj bank monographs on international financial markets 19feb2004 by maurice obstfeld, alan m. A crash course in the future of finance by nouriel roubini and stephen mihm was a very interesting book, offering solutions to a stabilize the financial system. This book presents an economic history of international capital mobility in the modern era. Sep 16, 2017 the classical case for flexible exchange rates rests on the argument that without the constraint of a currency target, policymakers are free to adjust the domestic monetary stance efficiently in response to business cycle disturbances, and choose their own inflation target. Currency crisis is one kind of financial crisis, according to eichengreen et al1997, currency crisis is that one country have to give up its original exchange rate system under pressure, its currency devalue considerably, or accept assistance from other institutions. The book shows that variation in policy makers willingness to implement.
The theory of moral sentiments 1759 and the wealth. Andersenshocks and the viability of a fixed exchange rate commitment. The volume demonstrates that the recent globalization can be. Obstfeld, maurice, the logic of currency crises, working paper no. Although such crisesthe latin american debt crisis of the 1980s, the speculations on european currencies in the early 1990s, and the ensuing mexican, south american, and asian criseshave played a central role in world affairs and continue to occur at an alarming rate, many questions about their causes and effects remain to be answered. Comparison of obstfeld 1996 and morris and shin 1998. Obstfeld, w1486 rational and selffulfilling balanceofpayments crises. Obstfeld, models of currency crises with selffulfilling features, nber working paper no. Paul krugmans currency and crises is a collection of 11 academic essays on international monetary economics written between the late 1970s and 1980s.
Currency crisis models currency crises have been the subject of an extensive economic literature, both theoretical and empirical. Obstfeld, the logic of currency crises, nber reprint no. Interestrate and borrowing defense against speculative attack. National income accounting and the balance of payments 3. That literature, i argue, throws little light on events such as the european exchange rate mechanism collapse of 199293.
What factors determine a governments decision to abandon a currency peg or hang on. The first generation and second generation financial crisis. He won the 2008 nobel memorial prize in economic sciences. Krugman author, maurice obstfeld author, marc melitz author ebook pdf instant download table of content 1. In a great recession, the case for flexible exchange rates is. This kind of circular logic is characteristic of the second generation models of currency crises. Models of currency crises with selffulfilling features. Suppose that your viewof the macroeconomy is a textbook naturalrate. This model suggests that the period preceding a currency crisis 2for detailed surveys of the theoretical literature see agenor, bhandari, and flood 1992, blackburn and sola 1993, and garber and svensson 1994.
Nber working paper series the logic of currency crises maurice obstfeld working paper no. The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency market equilibria. After experiencing rapid growth throughout the 1990s, the economies relied heavily on foreign debt to finance their growth, so when the taps were turned off they struggled to meet the debt payments. Financial crisis books meet your next favorite book.
Jan 01, 2004 journal of international money and finance 18. Once one recognizes that governments borrow international reserves and exercise other policy options to defend fixed exchange rates during. But action is not a separate and later step in sensemaking. Rational and selffulfilling balanceofpayments crises. Currency crisis models kellogg school of management. Budget deficits currency crises currency crisis models. A first stop for readers is the dissenting report by three members of the financial crisis inquiry commission keith hennessey, douglas holtzeakin, and william thomas that zeros in on the key causes of the crisis. This paper then presents two different models in which crisis and realignment result from the interaction of rational private economic actors and a government that pursues welldefined policy goals. International finance theory and policy 10th edition krugman. In a setting of purposeful action by the authorities, the possibility of selffulfilling crises becomes important.
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