The problem is to evaluate the likelihood that a country will face a currency or balance of payments crisis over a given horizon. When is it rational for market participants to expect a depreciation of the currency? On the basis of considerable empirical studies we know that in both banking and...

This paper discusses recent empirical research on the interplay between fiscal policies and external imbalances in the G3 countries, focusing on the stock-flow dynamics of public and foreign deficits and debt accumulation