130 Years of Fiscal Vulnerabilities and Currency Crashes in Advanced Economies
This paper investigates the empirical link between fiscal vulnerabilities and currency crashes in advanced economies over the last 130 years, building on a new data set of real effective exchange rates and fiscal balances for 21 countries since 1880. The paper finds evidence that crashes depend more...
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| Veröffentlicht in: | IMF economic review 2011-12, Vol.59 (4), p.683-716 |
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| creator | FRATZSCHER, MARCEL MEHL, ARNAUD VANSTEENKISTE, ISABEL |
| description | This paper investigates the empirical link between fiscal vulnerabilities and currency crashes in advanced economies over the last 130 years, building on a new data set of real effective exchange rates and fiscal balances for 21 countries since 1880. The paper finds evidence that crashes depend more on prospective fiscal deficits than on actual ones, and more on the composition of public debt (that is, rollover/sudden stop risk) than on its level. The paper also uncovers significant nonlinear effects at high levels of public debt as well as significantly negative risk premiums for major reserve currencies, which enjoy a lower probability of currency crash than other currencies ceteris paribus. Yet, the estimates indicate that such premiums remain small in size relative to the conditional probability of a currency crash if prospective fiscal deficits or rollover I sudden stop risk are high. |
| doi_str_mv | 10.1057/imfer.2011.23 |
| format | Article |
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Yet, the estimates indicate that such premiums remain small in size relative to the conditional probability of a currency crash if prospective fiscal deficits or rollover I sudden stop risk are high.</description><subject>American dollar</subject><subject>Bailouts</subject><subject>Banking crises</subject><subject>Budget deficits</subject><subject>Capital Markets</subject><subject>Currency</subject><subject>Debt restructuring</subject><subject>Default</subject><subject>Deficit financing</subject><subject>Economic aspects</subject><subject>Economic crisis</subject><subject>Economic Policy</subject><subject>Economics</subject><subject>Economics and Finance</subject><subject>Emerging markets</subject><subject>Eurozone</subject><subject>Evaluation</subject><subject>External debt</subject><subject>F30</subject><subject>F31</subject><subject>Federal budget deficit</subject><subject>Financial economics</subject><subject>Fiscal policy</subject><subject>Fixed exchange rates</subject><subject>Foreign exchange markets</subject><subject>Foreign exchange rates</subject><subject>International Economics</subject><subject>Macroeconomics</subject><subject>Macroeconomics/Monetary Economics//Financial Economics</subject><subject>Market economies</subject><subject>N20</subject><subject>Public debt</subject><subject>Public debts</subject><subject>Risk assessment</subject><subject>Social aspects</subject><subject>Sovereign debt</subject><subject>Studies</subject><issn>2041-4161</issn><issn>2041-417X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2011</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><sourceid>N95</sourceid><sourceid>7TQ</sourceid><sourceid>8G5</sourceid><sourceid>BENPR</sourceid><sourceid>GUQSH</sourceid><sourceid>M2O</sourceid><recordid>eNp1kc2L1DAUwIsouKx79CgEvdoxH03THIdhV10WvSyip5Cmr50MbVqTdmH--32zI-MKY8J7CY_f-86yt4yuGJXqkx9aiCtOGVtx8SK74LRgecHUz5enf8leZ1cp7SgeoXWl1UX2jQlKfoGNiYwtufHJ2Z78WPoA0da-97OHRGxoyGaJEYLbk020aYtGH8i6ebDBQUOu3RjGAdE32avW9gmu_ryX2f3N9f3mS373_fPXzfoud1JXc86AU-e0dE46WmD5TnABjLfOqtKKUgGFQjCAstalKmoFruaKuqpUDfBGXGbvj2GnOP5eIM1mNy4xYEajqWaFlFIh9OEIdbYH40M7ztG6AVs0a65kJYVUFKn8DNXBYQD9GKD1aP6HX53h8TYweHfW4eMzh3pJPkBClXy3nVNnl5TO1uPimFKE1kzRDzbuDaPmsGnztGlz2LThAvnbIx9hAneCJ9sfOBfNgxFWalR7lCcvYT1KgTKhlJUwipVmOw9_m0sYJ3SY5jTX_2V_d3TYpXmMp-wFK7jSuINHsRTLYw</recordid><startdate>20111201</startdate><enddate>20111201</enddate><creator>FRATZSCHER, MARCEL</creator><creator>MEHL, ARNAUD</creator><creator>VANSTEENKISTE, ISABEL</creator><general>Palgrave Macmillan</general><general>Palgrave Macmillan UK</general><general>Palgrave Macmillan Ltd. 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Years of Fiscal Vulnerabilities and Currency Crashes in Advanced Economies</title><author>FRATZSCHER, MARCEL ; MEHL, ARNAUD ; VANSTEENKISTE, ISABEL</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c598t-1e20cc95cc5c04057c323e12fca76a367e0e431ee6b9674b7ecb270c867de2d3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2011</creationdate><topic>American dollar</topic><topic>Bailouts</topic><topic>Banking crises</topic><topic>Budget deficits</topic><topic>Capital Markets</topic><topic>Currency</topic><topic>Debt restructuring</topic><topic>Default</topic><topic>Deficit financing</topic><topic>Economic aspects</topic><topic>Economic crisis</topic><topic>Economic Policy</topic><topic>Economics</topic><topic>Economics and Finance</topic><topic>Emerging markets</topic><topic>Eurozone</topic><topic>Evaluation</topic><topic>External debt</topic><topic>F30</topic><topic>F31</topic><topic>Federal budget 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The paper finds evidence that crashes depend more on prospective fiscal deficits than on actual ones, and more on the composition of public debt (that is, rollover/sudden stop risk) than on its level. The paper also uncovers significant nonlinear effects at high levels of public debt as well as significantly negative risk premiums for major reserve currencies, which enjoy a lower probability of currency crash than other currencies ceteris paribus. Yet, the estimates indicate that such premiums remain small in size relative to the conditional probability of a currency crash if prospective fiscal deficits or rollover I sudden stop risk are high.</abstract><cop>London</cop><pub>Palgrave Macmillan</pub><doi>10.1057/imfer.2011.23</doi><tpages>34</tpages></addata></record> |
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| ispartof | IMF economic review, 2011-12, Vol.59 (4), p.683-716 |
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| language | eng |
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| source | Jstor Complete Legacy; RePEc; PAIS Index; SpringerLink Journals - AutoHoldings |
| subjects | American dollar Bailouts Banking crises Budget deficits Capital Markets Currency Debt restructuring Default Deficit financing Economic aspects Economic crisis Economic Policy Economics Economics and Finance Emerging markets Eurozone Evaluation External debt F30 F31 Federal budget deficit Financial economics Fiscal policy Fixed exchange rates Foreign exchange markets Foreign exchange rates International Economics Macroeconomics Macroeconomics/Monetary Economics//Financial Economics Market economies N20 Public debt Public debts Risk assessment Social aspects Sovereign debt Studies |
| title | 130 Years of Fiscal Vulnerabilities and Currency Crashes in Advanced Economies |
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