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Currency Crashes in Industrial Countries: What Determines Good and Bad Outcomes?

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  • Joseph E. Gagnon

Abstract

Sharp exchange rate depreciations, or currency crashes, are associated with poor economic outcomes in industrial countries only when they are caused by inflationary macroeconomic policies. Moreover, the poor outcomes are attributable to inflationary policies in general and not the currency crashes in particular. On the other hand, crashes caused by rising unemployment or external deficits have always been followed by solid economic growth, rising asset prices and stable or falling inflation rates.

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  • Joseph E. Gagnon, 2010. "Currency Crashes in Industrial Countries: What Determines Good and Bad Outcomes?," International Finance, Wiley Blackwell, vol. 13(2), pages 165-194, August.
    • Handle: RePEc:bla:intfin:v:13:y:2010:i:2:p:165-194
    DOI: 10.1111/j.1468-2362.2010.01261.x
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    References listed on IDEAS

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    Cited by:

    1. Yanping Zhao & Jakob Haan & Bert Scholtens & Haizhen Yang, 2014. "Sudden Stops and Currency Crashes," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 660-685, September.

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