The standard model of currency crises is amended to distinguish betweenunemployment aversion and financial fragility. Fragility is assumed to affect theauthorities’ sensitivity to a combination of high real interest rates and unemployment.An increase in fragility expands the region of...

Both raw intuition and past experience suggest that the success of an employment guaranteescheme (EGS) in safeguarding the welfare of the poor depends both on the wage itpromises, and the ease with which any worker can gain access. An EGS is thus at once awage guarantee and a rationing device....