at Google ScholarTitle data
Bauer, Christian ; Herz, Bernhard ; Karb, Volker:
The other twins : currency and debt crises.
In: Jahrbuch für Wirtschaftswissenschaften = Review of Economics.
Vol. 54
(2003)
Issue 3
.
- pp. 248-267.
ISSN 0948-5139
Abstract in another language
Empirically, currency crises are more frequently accompanied by simultaneous sovereign debt crises than by banking crises. Nevertheless the phenomenon of twin currency and debt crises has so far been treated in economic literature only sparsely. We analyse the optimal policy of a government that may choose and combine two policy alternatives. She may choose at the same time whether to keep or alternatively exit an existing exchange rate peg and whether or not to default on her debt. Both parameters have a large impact not only on the public welfare but on the government's budget as well. The resulting incentive system can generate situations with self-fulfilling expectations. In some situations an internal contagion effect arises. A crisis in the sovereign debt market spreads to the sector of exchange rate policy and causes a devaluation as well. Private investors' default expectations thus can not only cause a sovereign debt crisis but may lead to a currency crisis as well.
Further data
| Item Type: | Article in a journal |
|---|---|
| Refereed: | Yes |
| Keywords: | currency crises; internal contagion; self-fulfilling expectations and sovereign debt |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance > Chair Economics I - International Economics and Finance - 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 - International Economics and Finance |
| Result of work at the UBT: | Yes |
| DDC Subjects: | 300 Social sciences > 330 Economics |
| Date Deposited: | 20 May 2015 06:38 |
| Last Modified: | 20 May 2015 06:38 |
| URI: | https://eref.uni-bayreuth.de/id/eprint/10162 |