Currency Crises: Theory and Evidence. Lecture 3 IME LIUC 2010. The most dramatic form of exchange rate volatility is a currency crisis – when an exchange rate depreciates substantially in a short period.
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Currency Crises: Theory and Evidence
IME LIUC 2010
The objective of the government is to minimizethe cost
Source: IMF, IFS, Sept. 2000
and that weak fundamentals triggered the crises
mounting non-performing loans
Weak fundamentals: CA deficits
Weak fundamentals: drop in export
Weak fundamentals: Imbalances
in foreign debt accumulation
Role of exogenous shocks