Government finance in the wake of currency crises
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We address three questions: (i) Can classical models be reconciled with the fact that many crises are marked by high rates of depreciation and small increases in seignorage revenue? (ii) What are the implications of different financing methods for post-crisis rates of inflation and depreciation? (iii) How do governments pay for the fiscal costs associated with currency crises? To study these questions we use a general equilibrium model in which prospective government deficits trigger a currency crisis. 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). © 2006 Elsevier B.V. All rights reserved.
Published Version (Please cite this version)10.1016/j.jmoneco.2005.03.012
Publication InfoBurnside, C; Eichenbaum, M; & Rebelo, S (2006). Government finance in the wake of currency crises. Journal of Monetary Economics, 53(3). pp. 401-440. 10.1016/j.jmoneco.2005.03.012. Retrieved from https://hdl.handle.net/10161/2078.
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