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Government Finance in the Wake of Currency Crises

Author

Listed:
  • Eichenbaum, Martin
  • Rebelo, Sérgio
  • Burnside, Craig

Abstract

This Paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different financing methods for post-crisis rates of inflation and depreciation? We study these questions using a general equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).

Suggested Citation

  • Eichenbaum, Martin & Rebelo, Sérgio & Burnside, Craig, 2003. "Government Finance in the Wake of Currency Crises," CEPR Discussion Papers 3939, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3939
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    More about this item

    Keywords

    Currency crisis; Banking crisis; Speculative attacks; Seigniorage; Fiscal reform; Bailouts;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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    This paper has been announced in the following NEP Reports:

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