Models of Currency Crises with Self-Fulfilling Features /

Obstfeld, Maurice.

Models of Currency Crises with Self-Fulfilling Features / Maurice Obstfeld. - Cambridge, Mass. National Bureau of Economic Research 1995. - 1 online resource: illustrations (black and white); - NBER working paper series no. w5285 . - Working Paper Series (National Bureau of Economic Research) no. w5285. .

October 1995.

The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency-market equilibria. After describing an illustrative model in which high unemployment may cause an exchange- rate crisis with self-fulfilling features, the paper reviews some other self-reinforcing mechanisms. Recent econometric evidence seems to support the practical importance of these mechanisms.




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