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Discussion Paper Details

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Title: Models of Currency Crises with Self-fulfilling Features

Author(s): Maurice Obstfeld

Publication Date: January 1996

Keyword(s): Balance-of-payments Crisis, Fixed Exchange Rate, Multiple Equilibria and Speculative Attack

Programme Area(s): International Macroeconomics

Abstract: 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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Bibliographic Reference

Obstfeld, M. 1996. 'Models of Currency Crises with Self-fulfilling Features'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1315