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Perspectiveson the Recent Currency Crisis Literature

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  • Ms. Nancy P. Marion
  • Mr. Robert P Flood

Abstract

In the 1990s, currency crises in Europe, Mexico, and Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates and have prompted researchers to undertake new theoretical and empirical analysis of these events. This paper provides some perspective on this work and relates it to earlier research. It derives the optimal commitment to a fixed exchange rate and proposes a common framework for analyzing currency crises. This framework stresses the important role of speculators and recognizes that the government’s commitment to a fixed exchange rate is constrained by other policy goals. The final section finds that some crises may be particularly difficult to predict using currently popular methods.

Suggested Citation

  • Ms. Nancy P. Marion & Mr. Robert P Flood, 1998. "Perspectiveson the Recent Currency Crisis Literature," IMF Working Papers 1998/130, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1998/130
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    3. Calvo, Sara & Reinhart, Carmen, 1996. "Capital flows to Latin America : Is there evidence of contagion effects?," Policy Research Working Paper Series 1619, The World Bank.
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