Despite the fact that Argentina has been suffering from recession for years the timing and severity of the recent currency crisis has surprised most observers. This paper analyzes whether the "early warning" or "signals" approach of Kaminsky (1998), Kaminsky/Lizondo/Reinhart (1998) and...

While virtually all modern models of exchange rate crises recognise that the decision to abandon an exchange rate peg depends on how harshly policy makers are willing to defend the regime, they virtually never model how the exchange rate is defended. In this paper we incorporate both the...

Evolution of speculative attack models show certain progress in developing idea of the role of expectations in the crisis mechanism. Obstfeld (1996) defined expectations as fully exogenous. Morris and Shin (1998) endogenised the expectations with respect to noise leaving information significance...

Currency crises are a significant feature of the present-day world economy, in which financial transactions are many times larger than monetary flows in the "real economy", so that defending a currency's exchange-rate is a major challenge for the governments of countries which may be smaller...

A technical analysis shows that the doomsayers who support the euro at all costs and those who naively theorize that a single currency is the root of all evil are both wrong. A euro exit could be a way of getting back to growth, but at the same time it would entail serious risks, especially for...

We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary's late-2008 currency crisis. The revaluation of debt burdens leads to higher default rates and a collapse in spending. These responses...