Models of Currency Crises with Self-Fulfilling Features

  title={Models of Currency Crises with Self-Fulfilling Features},
  author={M. Obstfeld},
  • M. Obstfeld
  • Published 1995
  • Economics
  • The discomfort a government suffers from speculation against its currency determines the strategic incentives of speculators and the scope for multiple currency-market equilibria. After describing an illustrative model in which high unemployment may cause an exchange- rate crisis with self-fulfilling features, the paper reviews some other self-reinforcing mechanisms. Recent econometric evidence seems to support the practical importance of these mechanisms. 
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