Obstfeld the logic of currency crisis book

The asian financial crisis of 1997 is another wellknown example of a currency crisis. What differentiates the new currency crisis literature from the classi. The theory of moral sentiments 1759 and the wealth. The logic of currency crises by maurice obstfeld ssrn. Comparison of obstfeld 1996 and morris and shin 1998. Suppose that your viewof the macroeconomy is a textbook naturalrate. No 4640, nber working papers from national bureau of economic research, inc abstract. Information dissemination in currency crises by christina.

The dramatic currency crisis that culminated in the august 1993 widening of exchangerate bands. A currency crisis is an episode in which the exchange rate depreciates substantially during a. Nber working paper series the logic of currency crises maurice obstfeld working paper no. Once one recognizes that governments borrow international reserves and exercise other policy options to defend fixed exchange rates during currency crises, the question arises. After experiencing rapid growth throughout the 1990s, the economies relied heavily on foreign debt to finance their growth, so when the taps were turned off they struggled to meet the debt payments. Science and education publishing, publisher of open access journals in the scientific, technical and medical fields. But action is not a separate and later step in sensemaking. Rational and selffulfilling balanceofpayments crises jstor. A simple example from obstfeld eer 1996 helps to clarify this point. National bureau of economic research, working paper series national bureau of economic research, working paper no. Country histories on debt, default, and financial crises.

Permission to offer this article was granted by the bank of france to professor obstfeld in a letter dated 20 october 1998. Currency crisis models currency crises have been the subject of an extensive economic literature, both theoretical and empirical. What factors determine a governments decision to abandon a currency peg or hang on. The dramatic currency crisis that culminated in the august. Budget deficits currency crises currency crisis models. Currency crisis is one kind of financial crisis, according to eichengreen et al1997, currency crisis is that one country have to give up its original exchange rate system under pressure, its currency devalue considerably, or accept assistance from other institutions. A crash course in the future of finance by nouriel roubini and stephen mihm is a nonfiction financial book. The new interest has also been driven, however, by the excit ing policy conclusions of new models, most of them inspired by the seminal paper of obstfeld 1994. According to a classification system of international monetary fund we can divide economic crisis to currency crisis, banking crisis, systemic financial crisis, debt crisis. As such, sensemaking is about making the intractable actionable. Currency crisis models kellogg school of management. There is no universally accepted definition of a currency crisis, but most would agree that they all involve one key element.

This paper then presents two different models in which crisis and realignment result from the interaction of rational private economic actors and a government that pursues welldefined policy goals. If you have work related to the crisis but it is not listed here, please follow the steps given at the bottom of this page to have your papers included here. In a setting of purposeful action by the authorities, the possibility of selffulfilling crises becomes important. Andersenshocks and the viability of a fixed exchange rate commitment. Whether youve loved the book or not, if you give your honest and detailed thoughts then people will find new books that are right for them. This is an incomplete reference list of economic papersbooks that are related to the current asian crisis. Gupta 1996 presents a short survey of theoretical and empirical results on currency and banking crises. Products of common causes maurice obstfeld and kenneth rogoff november 2009 abstract this paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Empirically, the book combines analyses of crossnational survey data of voters and firms policy evaluations with comparative case studies of national policy responses to the asian financial crisis of 19978 and the recent global financial crisis in eastern europe. It can be simply the result of the logic of the situation, in which holding a currency will become unattractive once its price is no longer stabi lized, and the end of the price. In a great recession, the case for flexible exchange rates is. International finance theory and policy 10th edition.

Paul krugman is the ford international professor of economics at the massachusetts institute of technology and a research associate of the national bureau of economic research. Jan 01, 2004 journal of international money and finance 18. We identify the benefits and costs of financial openness in terms of currency crises based on a novel. Rogoff, the mirage of fixed exchange rates journal of economic perspectives 9, fall 1995. Maurice obstfeld no 4640, nber working papers from national bureau of economic research, inc abstract. Currency crises national bureau of economic research. The volume demonstrates that the recent globalization can be. Rational and selffulfilling balanceofpayments crises. Tradeoffs among exchange rates, monetary policies, and capital mobility, international finance 0407003, university library of munich, germany. The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency market equilibria. That literature, i argue, throws little light on events such as the european exchange rate mechanism collapse of 199293. This article was originally published in 1994 in cahiers economiques et monetaires. The logic of currency crises, nber working papers 4640, national bureau of economic research, inc.

And the peg is abandoned because everybody attacked the currency. Obstfeld, the logic of currency crises, nber reprint no. Sep 16, 2017 the classical case for flexible exchange rates rests on the argument that without the constraint of a currency target, policymakers are free to adjust the domestic monetary stance efficiently in response to business cycle disturbances, and choose their own inflation target. The first generation and second generation financial crisis. Interestrate and borrowing defense against speculative attack. Financial crises and the politics of macroeconomic.

A crash course in the future of finance by nouriel roubini and stephen mihm was a very interesting book, offering solutions to a stabilize the financial system. Currency crisis theories some explanations for the russian case. The logic of currency crises maurice obstfeld working paper no. The first generation and second generation financial crisis theory finance essay. The book shows that variation in policy makers willingness to implement. Integration, crisis, and growth japanus center ufj bank monographs on international financial markets 19feb2004 by maurice obstfeld, alan m. This kind of circular logic is characteristic of the second generation models of currency crises. National income accounting and the balance of payments 3. Financial crisis books meet your next favorite book. Other readers will always be interested in your opinion of the books youve read. Although such crisesthe latin american debt crisis of the 1980s, the speculations on european currencies in the early 1990s, and the ensuing mexican, south american, and asian criseshave played a central role in world affairs and continue to occur at an alarming rate, many questions about their causes and effects remain to be answered. Jul 15, 20 the second category of book helps readers understand the factors behind the crisis, the policy response and its aftermath.

Obstfeld, w1486 rational and selffulfilling balanceofpayments crises. It blends narrative and quantitative methods and connects economic outcomes to the underlying political economy of international macroeconomics. Once one recognizes that governments borrow international reserves and exercise other policy options to defend fixed exchange rates during. The logic of currency crises, nber working paper no. He won the 2008 nobel memorial prize in economic sciences. Models of currency crises with selffulfilling features. Explain the three generations of currency crises models. Obstfeld, maurice, the logic of currency crises, working paper no. Krugman author, maurice obstfeld author, marc melitz author ebook pdf instant download table of content 1. International finance theory and policy 10th edition krugman. Models of currency crises with selffulfilling features sciencedirect. This paper studies the currency crisis theories, and with the help of them it finds out the main.