Government Finance in the Wake of Currency Crises / Craig Burnside, Martin Eichenbaum, Sergio Rebelo.

By:

Burnside, Craig

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9786.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

F31 - Foreign Exchange

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Abstract: 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 equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).

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Previous	nber w9783 House Prices and Consumer Welfare /	nber w9784 The Trouble with Stock Options /	nber w9785 The Optimal Taxation of Unskilled Labor with Job Search and Social Assistance /	nber w9786 Government Finance in the Wake of Currency Crises /	nber w9787 Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization /	nber w9788 From Cradle to Grave? The Lasting Impact of Childhood Health and Circumstance /	nber w9789 Product Choice and Product Switching /	Next

June 2003.

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 equilibrium model in which a currency crisis is triggered by prospective government deficits. We then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises: Korea (1997), Mexico (1994) and Turkey (2001).