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The Logic of Twin Debt and Currency Crises

Title data

Herz, Bernhard:
The Logic of Twin Debt and Currency Crises.
In: Kredit und Kapital. Vol. 38 (2005) Issue 1 . - pp. 1-21.
ISSN 0023-4591

Abstract in another language

While the well-known twin currency and banking crises has drawn a lot of interest a second type of twin crises, the simultaneous occurrence of currency and debt crises, has so far been neglected in the literature. The decision of a government to devalue and/or to default is closely interlinked through the government's intertemporal budget constraint and the market expectaions. On the one hand, debt and currency crisis are negatively interlinked as a debt crisis eases the fiscal burden of the government thereby making a currency crisis less likely and vice versa. On the other hand, debt and currency crises are positively interlinked, as the expectation of a debt crisis can increase the fiscal burden by rising interest rates so that an additional crisis becomes more likely.

Further data

Item Type: Article in a journal
Refereed: Yes
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 13 Apr 2015 08:36
Last Modified: 13 Apr 2015 08:36
URI: https://eref.uni-bayreuth.de/id/eprint/10160