Government finance in the wake of currency crises

Burnside, C. , Eichenbaum, M. and Rebelo, S. (2006) Government finance in the wake of currency crises. Journal of Monetary Economics, 53(3), pp. 401-440. (doi:10.1016/j.jmoneco.2005.03.012)

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We address three questions: (i) Can classical models be reconciled with the fact that many crises are marked by high rates of depreciation and small increases in seignorage revenue? (ii) What are the implications of different financing methods for post-crisis rates of inflation and depreciation? (iii) How do governments pay for the fiscal costs associated with currency crises? To study these questions we use a general equilibrium model in which prospective government deficits trigger a currency crisis. 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).

Item Type:Articles
Glasgow Author(s) Enlighten ID:Burnside, Professor Craig
Authors: Burnside, C., Eichenbaum, M., and Rebelo, S.
Subjects:H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Monetary Economics
Published Online:22 April 2006

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