Currency Crises and Government Finances

Fiscal policy plays a big role in currency crises - before, and after they occur. Thus policymakers should not underestimate the importance of fiscal policy: a) the realization of large contingent liabilities can quickly, and dramatically alter government finances, leading to a currency crisis; b) the effects of a currency crisis on government finances depend on the structure of government revenue, spending, and debt; c) the fiscal policies adopted in response to a crisis, influence economic outcomes, especially inflation, and depreciation. The note reviews the traditional models of currency crises, explained as a consequence of unsustainable fiscal policy, and how debt is accumulated, how currency crisis then develops, and why does fiscal policy matter. Focusing on bank bailouts, it is argued that traditional models of currency crises are applicable to emerging markets, suggesting that deficits after the East Asia financial crises could have been anticipated given the region's deteriorating banking systems, but that economic outcomes largely depend on the mix of financing.

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Bibliographic Details
Main Author: Burnside, Craig
Language:English
Published: World Bank, Washington, DC 2002-05
Subjects:BANKING SYSTEMS, BUDGET CONSTRAINT, CENTRAL BANK, CONTINGENT LIABILITIES, CURRENCY, DEBT = INTEREST, DEVELOPMENT ECONOMICS, DOMESTIC PRICE, ECONOMIC OUTCOMES, ECONOMISTS, FISCAL, FISCAL BALANCE, FISCAL COST, FISCAL COSTS, FISCAL POLICIES, FISCAL POLICY, FISCAL REFORM, FISCAL REFORMS, FISCAL SUSTAINABILITY, FIXED EXCHANGE RATE, GDP, GOVERNMENT ACTION, GOVERNMENT BUDGET, GOVERNMENT DEBT, GOVERNMENT POLICIES, GOVERNMENT REVENUE, GROWTH RATE, INFLATION, INFLATION RATE, INTEREST RATE, INTERNATIONAL MONETARY FUND, LOCAL CURRENCY, MONETARY POLICIES, MONETARY POLICY, MONEY DEMAND, PRESENT VALUE, PRESIDENCY, PUBLIC SECTOR, REAL GROWTH, REAL INTEREST RATE, RESERVES, SEIGNIORAGE, WAGES CURRENCY REALIGNMENTS, FINANCIAL CRISES, CONTINGENT LIABILITY, GOVERNMENT FINANCIAL INSTITUTIONS, REVENUE MEASURES, PUBLIC SPENDING, DEBT CRISIS, INFLATIONARY PRESSURES, CURRENCY DEVALUATION, BANKING DISTRESS, EMERGING ECONOMIES,
Online Access:http://documents.worldbank.org/curated/en/2002/05/2011711/currency-crises-government-finances
https://hdl.handle.net/10986/11348
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spelling dig-okr-10986113482024-08-08T17:51:51Z Currency Crises and Government Finances Burnside, Craig BANKING SYSTEMS BUDGET CONSTRAINT CENTRAL BANK CONTINGENT LIABILITIES CURRENCY DEBT = INTEREST DEVELOPMENT ECONOMICS DOMESTIC PRICE ECONOMIC OUTCOMES ECONOMISTS FISCAL FISCAL BALANCE FISCAL COST FISCAL COSTS FISCAL POLICIES FISCAL POLICY FISCAL REFORM FISCAL REFORMS FISCAL SUSTAINABILITY FIXED EXCHANGE RATE GDP GOVERNMENT ACTION GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT POLICIES GOVERNMENT REVENUE GROWTH RATE INFLATION INFLATION RATE INTEREST RATE INTERNATIONAL MONETARY FUND LOCAL CURRENCY MONETARY POLICIES MONETARY POLICY MONEY DEMAND PRESENT VALUE PRESIDENCY PUBLIC SECTOR REAL GROWTH REAL INTEREST RATE RESERVES SEIGNIORAGE WAGES CURRENCY REALIGNMENTS FISCAL POLICY FINANCIAL CRISES CONTINGENT LIABILITY GOVERNMENT FINANCIAL INSTITUTIONS REVENUE MEASURES PUBLIC SPENDING DEBT CRISIS INFLATIONARY PRESSURES CURRENCY DEVALUATION BANKING DISTRESS EMERGING ECONOMIES BANKING SYSTEMS Fiscal policy plays a big role in currency crises - before, and after they occur. Thus policymakers should not underestimate the importance of fiscal policy: a) the realization of large contingent liabilities can quickly, and dramatically alter government finances, leading to a currency crisis; b) the effects of a currency crisis on government finances depend on the structure of government revenue, spending, and debt; c) the fiscal policies adopted in response to a crisis, influence economic outcomes, especially inflation, and depreciation. The note reviews the traditional models of currency crises, explained as a consequence of unsustainable fiscal policy, and how debt is accumulated, how currency crisis then develops, and why does fiscal policy matter. Focusing on bank bailouts, it is argued that traditional models of currency crises are applicable to emerging markets, suggesting that deficits after the East Asia financial crises could have been anticipated given the region's deteriorating banking systems, but that economic outcomes largely depend on the mix of financing. 2012-08-13T14:49:34Z 2012-08-13T14:49:34Z 2002-05 http://documents.worldbank.org/curated/en/2002/05/2011711/currency-crises-government-finances https://hdl.handle.net/10986/11348 English PREM Notes; No. 68 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank application/pdf text/plain World Bank, Washington, DC
institution Banco Mundial
collection DSpace
country Estados Unidos
countrycode US
component Bibliográfico
access En linea
databasecode dig-okr
tag biblioteca
region America del Norte
libraryname Biblioteca del Banco Mundial
language English
topic BANKING SYSTEMS
BUDGET CONSTRAINT
CENTRAL BANK
CONTINGENT LIABILITIES
CURRENCY
DEBT = INTEREST
DEVELOPMENT ECONOMICS
DOMESTIC PRICE
ECONOMIC OUTCOMES
ECONOMISTS
FISCAL
FISCAL BALANCE
FISCAL COST
FISCAL COSTS
FISCAL POLICIES
FISCAL POLICY
FISCAL REFORM
FISCAL REFORMS
FISCAL SUSTAINABILITY
FIXED EXCHANGE RATE
GDP
GOVERNMENT ACTION
GOVERNMENT BUDGET
GOVERNMENT DEBT
GOVERNMENT POLICIES
GOVERNMENT REVENUE
GROWTH RATE
INFLATION
INFLATION RATE
INTEREST RATE
INTERNATIONAL MONETARY FUND
LOCAL CURRENCY
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
PRESENT VALUE
PRESIDENCY
PUBLIC SECTOR
REAL GROWTH
REAL INTEREST RATE
RESERVES
SEIGNIORAGE
WAGES CURRENCY REALIGNMENTS
FISCAL POLICY
FINANCIAL CRISES
CONTINGENT LIABILITY
GOVERNMENT FINANCIAL INSTITUTIONS
REVENUE MEASURES
PUBLIC SPENDING
DEBT CRISIS
INFLATIONARY PRESSURES
CURRENCY DEVALUATION
BANKING DISTRESS
EMERGING ECONOMIES
BANKING SYSTEMS
BANKING SYSTEMS
BUDGET CONSTRAINT
CENTRAL BANK
CONTINGENT LIABILITIES
CURRENCY
DEBT = INTEREST
DEVELOPMENT ECONOMICS
DOMESTIC PRICE
ECONOMIC OUTCOMES
ECONOMISTS
FISCAL
FISCAL BALANCE
FISCAL COST
FISCAL COSTS
FISCAL POLICIES
FISCAL POLICY
FISCAL REFORM
FISCAL REFORMS
FISCAL SUSTAINABILITY
FIXED EXCHANGE RATE
GDP
GOVERNMENT ACTION
GOVERNMENT BUDGET
GOVERNMENT DEBT
GOVERNMENT POLICIES
GOVERNMENT REVENUE
GROWTH RATE
INFLATION
INFLATION RATE
INTEREST RATE
INTERNATIONAL MONETARY FUND
LOCAL CURRENCY
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
PRESENT VALUE
PRESIDENCY
PUBLIC SECTOR
REAL GROWTH
REAL INTEREST RATE
RESERVES
SEIGNIORAGE
WAGES CURRENCY REALIGNMENTS
FISCAL POLICY
FINANCIAL CRISES
CONTINGENT LIABILITY
GOVERNMENT FINANCIAL INSTITUTIONS
REVENUE MEASURES
PUBLIC SPENDING
DEBT CRISIS
INFLATIONARY PRESSURES
CURRENCY DEVALUATION
BANKING DISTRESS
EMERGING ECONOMIES
BANKING SYSTEMS
spellingShingle BANKING SYSTEMS
BUDGET CONSTRAINT
CENTRAL BANK
CONTINGENT LIABILITIES
CURRENCY
DEBT = INTEREST
DEVELOPMENT ECONOMICS
DOMESTIC PRICE
ECONOMIC OUTCOMES
ECONOMISTS
FISCAL
FISCAL BALANCE
FISCAL COST
FISCAL COSTS
FISCAL POLICIES
FISCAL POLICY
FISCAL REFORM
FISCAL REFORMS
FISCAL SUSTAINABILITY
FIXED EXCHANGE RATE
GDP
GOVERNMENT ACTION
GOVERNMENT BUDGET
GOVERNMENT DEBT
GOVERNMENT POLICIES
GOVERNMENT REVENUE
GROWTH RATE
INFLATION
INFLATION RATE
INTEREST RATE
INTERNATIONAL MONETARY FUND
LOCAL CURRENCY
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
PRESENT VALUE
PRESIDENCY
PUBLIC SECTOR
REAL GROWTH
REAL INTEREST RATE
RESERVES
SEIGNIORAGE
WAGES CURRENCY REALIGNMENTS
FISCAL POLICY
FINANCIAL CRISES
CONTINGENT LIABILITY
GOVERNMENT FINANCIAL INSTITUTIONS
REVENUE MEASURES
PUBLIC SPENDING
DEBT CRISIS
INFLATIONARY PRESSURES
CURRENCY DEVALUATION
BANKING DISTRESS
EMERGING ECONOMIES
BANKING SYSTEMS
BANKING SYSTEMS
BUDGET CONSTRAINT
CENTRAL BANK
CONTINGENT LIABILITIES
CURRENCY
DEBT = INTEREST
DEVELOPMENT ECONOMICS
DOMESTIC PRICE
ECONOMIC OUTCOMES
ECONOMISTS
FISCAL
FISCAL BALANCE
FISCAL COST
FISCAL COSTS
FISCAL POLICIES
FISCAL POLICY
FISCAL REFORM
FISCAL REFORMS
FISCAL SUSTAINABILITY
FIXED EXCHANGE RATE
GDP
GOVERNMENT ACTION
GOVERNMENT BUDGET
GOVERNMENT DEBT
GOVERNMENT POLICIES
GOVERNMENT REVENUE
GROWTH RATE
INFLATION
INFLATION RATE
INTEREST RATE
INTERNATIONAL MONETARY FUND
LOCAL CURRENCY
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
PRESENT VALUE
PRESIDENCY
PUBLIC SECTOR
REAL GROWTH
REAL INTEREST RATE
RESERVES
SEIGNIORAGE
WAGES CURRENCY REALIGNMENTS
FISCAL POLICY
FINANCIAL CRISES
CONTINGENT LIABILITY
GOVERNMENT FINANCIAL INSTITUTIONS
REVENUE MEASURES
PUBLIC SPENDING
DEBT CRISIS
INFLATIONARY PRESSURES
CURRENCY DEVALUATION
BANKING DISTRESS
EMERGING ECONOMIES
BANKING SYSTEMS
Burnside, Craig
Currency Crises and Government Finances
description Fiscal policy plays a big role in currency crises - before, and after they occur. Thus policymakers should not underestimate the importance of fiscal policy: a) the realization of large contingent liabilities can quickly, and dramatically alter government finances, leading to a currency crisis; b) the effects of a currency crisis on government finances depend on the structure of government revenue, spending, and debt; c) the fiscal policies adopted in response to a crisis, influence economic outcomes, especially inflation, and depreciation. The note reviews the traditional models of currency crises, explained as a consequence of unsustainable fiscal policy, and how debt is accumulated, how currency crisis then develops, and why does fiscal policy matter. Focusing on bank bailouts, it is argued that traditional models of currency crises are applicable to emerging markets, suggesting that deficits after the East Asia financial crises could have been anticipated given the region's deteriorating banking systems, but that economic outcomes largely depend on the mix of financing.
topic_facet BANKING SYSTEMS
BUDGET CONSTRAINT
CENTRAL BANK
CONTINGENT LIABILITIES
CURRENCY
DEBT = INTEREST
DEVELOPMENT ECONOMICS
DOMESTIC PRICE
ECONOMIC OUTCOMES
ECONOMISTS
FISCAL
FISCAL BALANCE
FISCAL COST
FISCAL COSTS
FISCAL POLICIES
FISCAL POLICY
FISCAL REFORM
FISCAL REFORMS
FISCAL SUSTAINABILITY
FIXED EXCHANGE RATE
GDP
GOVERNMENT ACTION
GOVERNMENT BUDGET
GOVERNMENT DEBT
GOVERNMENT POLICIES
GOVERNMENT REVENUE
GROWTH RATE
INFLATION
INFLATION RATE
INTEREST RATE
INTERNATIONAL MONETARY FUND
LOCAL CURRENCY
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
PRESENT VALUE
PRESIDENCY
PUBLIC SECTOR
REAL GROWTH
REAL INTEREST RATE
RESERVES
SEIGNIORAGE
WAGES CURRENCY REALIGNMENTS
FISCAL POLICY
FINANCIAL CRISES
CONTINGENT LIABILITY
GOVERNMENT FINANCIAL INSTITUTIONS
REVENUE MEASURES
PUBLIC SPENDING
DEBT CRISIS
INFLATIONARY PRESSURES
CURRENCY DEVALUATION
BANKING DISTRESS
EMERGING ECONOMIES
BANKING SYSTEMS
author Burnside, Craig
author_facet Burnside, Craig
author_sort Burnside, Craig
title Currency Crises and Government Finances
title_short Currency Crises and Government Finances
title_full Currency Crises and Government Finances
title_fullStr Currency Crises and Government Finances
title_full_unstemmed Currency Crises and Government Finances
title_sort currency crises and government finances
publisher World Bank, Washington, DC
publishDate 2002-05
url http://documents.worldbank.org/curated/en/2002/05/2011711/currency-crises-government-finances
https://hdl.handle.net/10986/11348
work_keys_str_mv AT burnsidecraig currencycrisesandgovernmentfinances
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