A Model to Explain the Duration of a Currency Crisis

There are two main schools of thought which seek to explain currency crises; fundamentalist theories (Krugman, 1979) and speculative theories (Obstfeld, 1986). However, neither of these approaches considers the duration of a currency crisis. I explain the duration of a crisis in terms of a war of attrition model. Having set up the basic framework, I consider the impact of a change in the parameter values on a government's optimal time of concession. I then introduce asymmetric post stabilisation utilities into the framework