Please enable JavaScript.
Coggle requires JavaScript to display documents.
Currency Crises - Self-fulfilling? (Intro (To model crises, one must use…
Currency Crises - Self-fulfilling?
Intro
Whether they are self fulfilling depends on the context
To model crises, one must use the appropriate assumptions, which come down to either
Issues with fundamentals
includes 1st and 3rd gen models
No direct issues with fundamentals
2nd gen
1st Generation Models
Krugman
model specifies the timing of the crisis
but assumes a crisis in inevitable
2nd Generation
depends on the possibility of a fixed ex rate regime not being defended at all costs
and the govt having shown preference for internal over external goals
in a sense about fundamentals in the sense that government has limited power (eg compare to dollarization, euro)
3rd Generation Models
extends the notion of crises being self-fulfilling in to other parts of the economy
Domestic Solutions
Prevent
Mitigate
International Solutions
Prevent
Mitigate