This paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different fi­nancing methods for post-crisis rates of inflation and depreciation? We study these questions using a general...

This paper argues that the recent Southeast Asian currency crises was caused by large prospective deficits associated with implicit bailout guarantees to failing banking systems. We articulate this view using a simple dynamic general equilibrium model whose key feature is that a speculative...

This paper explores the implications of different strategies for financng the fiscal costs of twin crises for inflation and depreciation rates. We use a first-generation type model of speculative attacks which has four key features: (i) the crisis is triggered by prospective deficits; (ii) there...

This paper investigates the performance of early warning systems in real-time, using forecasts of indicators that were available at the moment predictions are to be made. The study analyzes currency crises in eight Latin American and Central and Eastern European countries, distinguishing an...

The first step for empirical studying currency crises is to identify or date these crises. This is not an easy task – not even the conceptual definition is agreed upon, let alone an operational definition. The choice of a definition has an impact on the identification of crises, and may even...