Nominal Debt and the Dynamics of Currency Crises

Arbeitspapier

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; post- devaluation inflation may exhibit little persistence, and money demand need not fall after the crisis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Center Discussion Paper ; No. 820

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; International Monetary Arrangements and Institutions ; Central Banks and Their Policies
• Subject: Währungskrise ; Öffentliche Schulden ; Abwertung ; Währungsspekulation ; Finanzpolitik ; Geldpolitik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Corsetti, Giancarlo ; Mackowiak, Bartosz
• Event: Veröffentlichung
• (who): Yale University, Economic Growth Center
• (where): New Haven, CT
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/98337
• Last update: 10.03.2025, 11:45 AM CET