Existing models of currency crisis were powerless to explain what happened. This was not a ‘first generation’ currency crisis brought about by excess budget deficits, as in Krugman (1979). Nor was the crisis caused by a conflict between the austerity needed to defend a fixed exchange and the expansion needed to remove high unemployment, as in Britain’s forced exit from the ERM in 1992 (Eichengr...

This paper analyzes the feasibility of various types of currency unions, such as a dollar bloc, Euro bloc, Yen bloc, and basket currency bloc in East Asia, and empirically estimates welfare effects of a currency union for East Asian economies. Judging from optimum currency area (OCA) criteria, including the symmetry of output and price shocks across countries, commitment to price stability, and...

One of the main sources currency crisis experienced by Indonesia is use paper money that not backed gold. The data analysis technique used in this research descriptive qualitative analysis, which a method describing description/conclusion dinar and dirham currencies as solution to global economic crisis. results on Dinar are impact using legal tenders world economy. because fiat will cause inst...

In June 2008 Justin Yifu Lin was appointed chief economist of the World Bank, right before the eruption of the worst global financial and economic crisis since theGreat Depression. Drawing on experience from his privileged position, Lin offers unique reflections on the cause of the crisis, why it was so serious and widespread, and its likely evolution. Arguing that conventional theories provide...

The Asian financial crisis in 1997 brought to the attention of member countries of the Association of South East Asian Countries (ASEAN-5) (comprising Indonesia, Malaysia, the Philippines, Singapore and Thailand) the need for closer monetary co-operation. Central to the OCA literature is the nature and symmetry of underlying economic disturbances. If the economic disturbances are similar across...

Abstract: Central banks have long been interested in obtaining precise estimations of money demand given the fact that the evolution of money demand plays a key role over several monetary variables. One implication of currency substitution is that the exchange rate could serve as another determinant of the demand for money. Due to the recent currency crisis in Iran, it would be important to inv...

Why are some currency crises followed by economic contractions while others are not? This paper is an attempt at answering this query. In particular, we investigate two closely related questions. First, we explore whether there is a difference in the output effects of a devaluation during “normal” periods versus crises ones; after all, during noncrisis periods, real exchange devaluation is seen...

This paper addresses two questions: (i) how do governments actually pay for the Þscal costs associated with currency crises; and (ii) what are the implications of different Þnancing methods for post-crisis rates of inßation and depreciation? We study these questions using a general equilibrium model in which a currency crisis is triggered by prospective government deÞcits. We then use our model...

Ecuador and El Salvador have recently adopted the U.S. dollar as legal tender, replacing their own national currencies.1 This same move has received serious attention in policy debates in both Argentina and Mexico. Abandoning the national currency is a decision with far-reaching economic and political implications that are not well understood. In response to this phenomenon, a growing literatur...