Government finance in the wake of currency crises

Craig Burnside; Martin Eichenbaum; Sergio Rebelo

doi:10.1016/j.jmoneco.2005.03.012

Government finance in the wake of currency crises

Craig Burnside, Martin Eichenbaum, Sergio Rebelo^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

19 Scopus citations

Abstract

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).

Original language	English (US)
Pages (from-to)	401-440
Number of pages	40
Journal	Journal of Monetary Economics
Volume	53
Issue number	3
DOIs	https://doi.org/10.1016/j.jmoneco.2005.03.012
State	Published - Apr 2006

Keywords

Bailouts
Banking crisis
Currency crisis
Fiscal reform
Seignorage
Speculative attacks

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.jmoneco.2005.03.012

Cite this

@article{2adf7cd6bcdc4989b0a6c3ff23be1361,

title = "Government finance in the wake of currency crises",

abstract = "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).",

keywords = "Bailouts, Banking crisis, Currency crisis, Fiscal reform, Seignorage, Speculative attacks",

author = "Craig Burnside and Martin Eichenbaum and Sergio Rebelo",

note = "Funding Information: We are grateful for an NSF grant through the National Bureau of Economic Research and a grant from the World Bank. The opinions in this paper are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago or the World Bank. We thank Martin Bodenstein, Pedro Garcia Duarte, Yuliya Mescheryakova, Carlos V{\'e}gh, and Jeffrey Wood for valuable comments and Selim Elekdag, Su Youne Lee and Mi Hwa Park for invaluable assistance with data. ",

year = "2006",

month = apr,

doi = "10.1016/j.jmoneco.2005.03.012",

language = "English (US)",

volume = "53",

pages = "401--440",

journal = "Carnegie-Rochester Confer. Series on Public Policy",

issn = "0304-3932",

publisher = "Elsevier",

number = "3",

}

TY - JOUR

T1 - Government finance in the wake of currency crises

AU - Burnside, Craig

AU - Eichenbaum, Martin

AU - Rebelo, Sergio

N1 - Funding Information: We are grateful for an NSF grant through the National Bureau of Economic Research and a grant from the World Bank. The opinions in this paper are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago or the World Bank. We thank Martin Bodenstein, Pedro Garcia Duarte, Yuliya Mescheryakova, Carlos Végh, and Jeffrey Wood for valuable comments and Selim Elekdag, Su Youne Lee and Mi Hwa Park for invaluable assistance with data.

PY - 2006/4

Y1 - 2006/4

N2 - 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).

AB - 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).

KW - Bailouts

KW - Banking crisis

KW - Currency crisis

KW - Fiscal reform

KW - Seignorage

KW - Speculative attacks

UR - http://www.scopus.com/inward/record.url?scp=33645898991&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=33645898991&partnerID=8YFLogxK

U2 - 10.1016/j.jmoneco.2005.03.012

DO - 10.1016/j.jmoneco.2005.03.012

M3 - Article

AN - SCOPUS:33645898991

SN - 0304-3932

VL - 53

SP - 401

EP - 440

JO - Carnegie-Rochester Confer. Series on Public Policy

JF - Carnegie-Rochester Confer. Series on Public Policy

IS - 3

ER -

Government finance in the wake of currency crises

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this