This paper studies the role of unemployment in sterling’s inter-war experience. According to most narrative accounts, the proximate cause of the 1931 sterling crisis was a high and rising unemployment rate that placed pressure on British governments to pursue reflationary policies. We present...

We present a stylized framework which encompasses a variety of "balance sheet approaches" to currency crises that have been suggested in the literature, and analyze their policy implications. The common theme is that currency and maturity mismatches in private sector balance sheets constrain the...

Defending a government’s exchange-rate commitment with active interest rate policy is not an option in the Krugman-Flood-Garber (KFG) model of speculative attacks. In that model, the interest rate is the passive reflection of currency-depreciation expectations. In this paper we show how to...