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Is there a relationship between fiscal sustainability and currency crises? International evidence based on causality tests

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  • Alexis Cruz-Rodríguez

    (Pontificia Universidad Católica Madre y Maestra, Av. Abraham Lincoln Esq. Rómulo Betancourt, Ensanche La Julia, Santo Domingo, Dominican Republic)

Abstract

This paper uses Granger causality tests on a fiscal sustainability indicator (FSI) and currency crises for 17 countries to evaluate the direction of causality between the FSI and currency crises. The FSI developed by Croce and Juan-Ramón (2003) is used. Also, different definitions for currency crises are used to evaluate whether they induce different results in the analysis. In general, the results suggest evidence of causality between the lagged FSI and currency crises.

Suggested Citation

  • Alexis Cruz-Rodríguez, 2014. "Is there a relationship between fiscal sustainability and currency crises? International evidence based on causality tests," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 7(1), pages 69-87, April.
    • Handle: RePEc:tei:journl:v:7:y:2014:i:1:p:69-87
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    More about this item

    Keywords

    Currency crisis; foreign exchange; fiscal sustainability; Granger causality;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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