Currency Crises: A Theoretical and Empirical Perspective (New Horizons in Money and Finance)

Currency Crises: A Theoretical and Empirical Perspective (New Horizons in Money and Finance)

by Andre Fourcans, Raphael Franck

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Overview

Fourçans (economics, ESSEC Business School, France) and Franck (research fellow, Aharon Meir Center for Banking, Bar Ilan University, Israel) assert that models concerning the outbreak and propagation of currency crises share many similarities. They examine first-, second-, and third-generation models of currency crises and give recommendations on how the international financial system should be reformed to prevent currency crises. A case study looks at the spread of the East Asian currency crisis to Russia and Brazil. The book will be useful for graduate students, academics, and researchers in international economics. Annotation ©2004 Book News, Inc., Portland, OR

Product Details

ISBN-13: 9781843764335
Publisher: Elgar, Edward Publishing, Inc.
Publication date: 01/28/2004
Series: New Horizons in Money and Finance
Pages: 288
Product dimensions: 6.30(w) x 9.30(h) x 1.10(d)

Table of Contents

List of figuresx
List of tablesxi
Introductionxiii
Part 1First-Generation Models of Currency Crises
1.Main Assumptions of First-generation Models5
1.The growth in domestic credit5
2.The outbreak of speculative attacks8
3.Chapter summary12
2.Aspects of the Policymaker's Behaviour13
1.Defences against speculative attacks13
2.The choice of an exchange rate regime after speculative attacks22
3.Speculative attacks in a stochastic framework24
4.Chapter summary26
3.Extensions of First-generation Models28
1.Fiscal sources of speculative attacks28
2.Real effects of currency crises32
3.Influence of the banking sector39
4.Coordination of speculative attacks and contagion43
5.Chapter summary46
6.Appendix47
Part 2Second-Generation Models of Currency Crises
4.Self-fulfilling Expectations and the Outbreak of Currency Crises53
1.Self-fulfilling speculative attacks53
2.Escape clause models57
3.Chapter summary62
5.Self-fulfilling Expectations and Currency Crisis Contagion64
1.Main assumptions of pure contagion models64
2.Pure contagion of currency crises76
3.Chapter summary79
6.The Relevance of Second-generation Models81
1.Regulatory implications of second-generation models81
2.Empirical assessments of currency crises83
3.Theoretical and empirical problems with multiple equilibria91
4.Chapter summary99
5.Appendix100
Part 3Third-Generation Models of Currency Crises
7.Economic Policy Tradeoffs and the Outbreak of Currency Crises107
1.The policymaker's optimal commitment to exchange rate stability107
2.Exchange-rate based stabilisation plans and currency crises108
3.Optimal monetary policy and the interest rate defence of the fixed exchange rate system115
4.The policymaker's reputation120
5.Chapter summary124
8.Deteriorated Fundamentals and Currency Crisis Contagion126
1.Models of 'common shocks'126
2.'Spillover' models128
3.Chapter summary137
9.Deteriorated Fundamentals and Speculators' Expectations139
1.Currency crises and financial crises139
2.Investors' behaviour and self-fulfilling currency crises155
3.Chapter summary166
Part 4Currency Crises and the International Financial System
10.The Spread of Currency Crises in Emerging Countries from 1997 to 1999: A Case Study172
1.Heralding signs of currency crises173
2.Macroeconomic pressures and crises in East Asian countries193
3.The Spread of the East Asian Crisis to Russia and Brazil200
4.Conclusion204
11.Currency Crises and Exchange Rate Regimes206
1.Features of exchange rate regimes206
2.Currency crises and the optimal exchange rate regime211
3.Conclusion216
4.Appendix216
12.The Role of International Financial Institutions218
1.Crisis prevention218
2.Controversial response programmes to crises219
3.The international lender of last resort226
4.Conclusion231
References233
Index259

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