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

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  • Cruz-Rodríguez, Alexis

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

  • Cruz-Rodríguez, Alexis, 2014. "Is there a relationship between fiscal sustainability and currency crises? International evidence based on causality tests," MPRA Paper 72103, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:72103
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    More about this item

    Keywords

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

    JEL classification:

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

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