Currency Crises and the Term Structure of Interest Rates |
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Authors: | Alan Sutherland |
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Institution: | (1) Department of Economics, University of St Andrews, St Andrews, Fife, KY16 9AL, UK |
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Abstract: | The currency crisis literature has identified two possible types of crisis: fundamentals based crises and self-fulfilling
crises. A fundamentals based crisis arises when some state variable, such as foreign exchange reserves, reaches a critical
level and triggers the abandonment of the fixed rate. A self-fulfilling crisis is triggered by an autonomous change in the
beliefs of speculators. This paper demonstrates how these two types of crises generate different behaviour in the term structure
in the period before the crisis.
JEL Classification Numbers: E43, F31 |
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Keywords: | currency crises term structure |
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