Varieties of Currency Crises

31 Pages Posted: 4 Jan 2004

See all articles by Graciela Kaminsky

Graciela Kaminsky

National Bureau of Economic Research (NBER); George Washington University - Department of Economics

Date Written: December 2003


The plethora of currency crises around the world has fueled many theories on the causes of speculative attacks. The first-generation models focus on fiscal problems. The second-generation models emphasize countercyclical policies and self-fulfilling crises. In the 1990s, models pinpoint to financial excesses. With the crisis of Argentina in 2001, models of sovereign default have become popular again. While the theoretical literature has emphasized variety, the empirical literature has supported the one size fits all' models. This paper contributes to the empirical literature by assessing whether the crises of the last thirty years are of different varieties. Crises are found to be of six varieties. Four of those varieties are associated with domestic economic fragility. But crises can also be provoked by just adverse world market conditions, such as the reversal of international capital flows. The so-called sudden-stop phenomenon identifies the fifth variety of crises. Finally, a small number of crises occur in economies with immaculate fundamentals but this type of crises is not an emerging-market phenomenon.

Suggested Citation

Kaminsky, Graciela, Varieties of Currency Crises (December 2003). NBER Working Paper No. w10193. Available at SSRN:

Graciela Kaminsky (Contact Author)

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