Currency boards and currency crises

Irwin, Gregor

doi:10.1093/oep/56.1.64

Cited by 17 publications

(16 citation statements)

References 13 publications

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“…In essence, we generalise that the result concerning the adverse impact of persistence on the credibility of a peg reported byDrazen and Masson's (1994), Jeanne's (1999) andIrwin's (2004) to an environment where output shocks can accumulate more than two periods and where both devaluations and revaluations are possible.…”

mentioning

confidence: 76%

“…Lockwood and Philippopoulos (1994) considered output persistence arising from the insider-outsider tension that is characteristic of corporatist wagesetting, and Obstfeld (1994Obstfeld ( , 1996Obstfeld ( , 1997 modified the Barro-Gordon closed economy framework by adding exchange rate pegs with escape clauses. In a onesided escape clause model that rules out revaluations, Drazen and Masson (1994), Jeanne (1999), and Irwin (2004) looked at the impact of output persistence on the sustainability of an exchange rate regime and showed how persistence adversely affects the policymaker's incentives to devalue. We differ from these contributions in that, following Obstfeld (1996), we consider a twosided escape clause setting where both devaluations and revaluations are possible, and also in that we incorporate unemployment persistence into a fully dynamic environment.…”

Section: Introductionmentioning

confidence: 99%

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Unemployment Persistence and the Sustainability of Exchange Rate Pegs

Castrén¹,

Takalo²,

Wood³

2010

Scottish Journal of Political Economy

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It is commonly thought that an open economy can accommodate output shocks through either exchange rate or real sector adjustments. We formalize this notion by incorporating unemployment persistence into a two‐sided escape clause model of currency crises. We show that unemployment persistence makes a currency peg more fragile and undermines the credibility of the monetary authority in a dynamic setting. The fragility is captured by a devaluation premium in expectations that increases the average inflation rate when the currency peg is more vulnerable to ‘busts’ than ‘booms’. This interaction between macroeconomic and microeconomic rigidities suggests that a policy reform can only be consistent if it renders either exchange rates or the economy more flexible.

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confidence: 76%

Section: Introductionmentioning

confidence: 99%

Unemployment Persistence and the Sustainability of Exchange Rate Pegs

Castrén¹,

Takalo²,

Wood³

2010

Scottish Journal of Political Economy

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“…13 Exports as a percentage of GDP increased from 28.9% in 1991 to 56.7% in 2001 (Bank of Thailand, 2005). 14 In a recent study, Irwin (2004) argues that fixed exchange rates supported by a currency board can become vulnerable to crises that can result in devaluation. 15 The stock of FDI in Thailand increased from US$ 29.9 billion in 2000 to US$37.99 in 2002(Bank of Thailand, 2005.…”

Section: Discussionmentioning

confidence: 99%

Financial Restructuring and Economic Growth in Thailand

Anwar

Gupta

2006

Global Economic Review

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After a sharp downturn in 1998, the Thai economy has up until 2003 registered a strong growth. There has also been a significant increase in exports as a percentage of the gross domestic product (GDP). While examining the performance of the Thai economy, this paper pays special attention to the factors that contributed to the Asian financial crisis of 1997-1998. Owing to increased financial rather than trade liberalization facilitated by improvements in communications technology, it is virtually impossible to eliminate the possibility of crises in the future. Through sound macro-economic management polices it is however possible to reduce the frequency of crises and their subsequent impact on the real economy. This paper suggests policies that may help to reduce the risk of similar crises in the future.Asian financial crisis, financial restructuring, Thailand's economic growth,

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“…Neither sound fundamentals nor foreign exchange credit lines seem to effectively prevent speculation. Even harder fixed exchange rate regimes, such as currency boards, are vulnerable to speculative attacks, as shown by the experiences of Hong Kong and Argentina (see Berg and Borensztein, 2000 and Irwin, 2004).…”

Section: Cape Verde: a Tale Of A Successful Peg To The Euromentioning

confidence: 99%

Cape Verde: The Case for Euroisation

Loureiro

Martins²,

Ribeiro³

2010

South African Journal of Economics

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After a decade of a successful peg to the euro, the authorities of Cape Verde are considering the official euroisation of the country. For an "ex ante" economic evaluation of such a move, this paper assesses whether Cape Verde fulfills key economic criteria devised by the optimum currency areas literature, using as benchmark the comparable records of the 27 European Union (EU) countries. The answer is positive. Overall, we find that Cape Verde is not less suited for euroisation than some of the current euro area members and most of the remaining members of the EU. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 Economic Society of South Africa.

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Currency boards and currency crises

Cited by 17 publications

References 13 publications

Unemployment Persistence and the Sustainability of Exchange Rate Pegs

Unemployment Persistence and the Sustainability of Exchange Rate Pegs

Financial Restructuring and Economic Growth in Thailand

Cape Verde: The Case for Euroisation

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