The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Currency Crises Models

  • Craig Burnside
  • Martin Eichenbaum
  • Sergio Rebelo
Reference work entry


Currency crises have occurred frequently in the post-war era. In this article we review the literature on the causes and consequences of currency crises. First- generation models attribute a central role to fiscal policy as a fundamental determinant of crises. Second-generation models emphasize the possibility of self-fulfilling speculative attacks and multiple equilibria. Third-generation models stress how financial fragility can lead to currency crises.


Asian currency crisis (1997) Bank runs Budget deficits Consumer optimization Credit risk Currency crises Currency crisis models Exchange rate regimes Financial crises Fiscal theory of the price level Fixed exchange rates Government budget constraint Government guarantees Intertemporal budget constraint Liquidity crises Money demand functions Money supply Purchasing power parity Seigniorage Speculative attacks 

JEL Classifications

D4 D10 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Craig Burnside
    • 1
  • Martin Eichenbaum
    • 1
  • Sergio Rebelo
    • 1
  1. 1.