Abstract

http://ssrn.com/abstract=403201
 
 

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Fiscal Deficits and Currency Crises


Giancarlo Marini


University of Rome II - Faculty of Economics

Giovanni Piersanti


University of Rome II - Department of Economics and Law

May 2003

CEIS Tor Vergata - Research Paper Series No. 15

Abstract:     
This paper investigates currency and financial crises in an optimizing general equilibrium model. It is shown that a rise in current and expected future budget deficits generates a real exchange rate appreciation and a decumulation of external assets, leading up to a currency crisis when foreign reserves approximate a critical level. Strong empirical support for our model is obtained by a probit estimation for Latin American and Asian countries.

Number of Pages in PDF File: 37

Keywords: budget deficits, foreign exchange reserves, currency crises

JEL Classification: F31, F32, F41, E52, E62

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Date posted: May 8, 2003  

Suggested Citation

Marini, Giancarlo and Piersanti, Giovanni, Fiscal Deficits and Currency Crises (May 2003). CEIS Tor Vergata - Research Paper Series No. 15. Available at SSRN: http://ssrn.com/abstract=403201 or http://dx.doi.org/10.2139/ssrn.403201

Contact Information

Giancarlo Marini (Contact Author)
University of Rome II - Faculty of Economics ( email )
Via Columbia n.2
Rome, 00100
Italy
Giovanni Piersanti
University of Rome II - Department of Economics and Law ( email )
Via Columbia n.2
I-00133 Rome
Italy
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