Currency boards and currency Crises.
This paper demonstrates how a currency board can become vulnerable to a crisis in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete inform...
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2001
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| _version_ | 1826276465780457472 |
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| author | Irwin, G |
| author_facet | Irwin, G |
| author_sort | Irwin, G |
| collection | OXFORD |
| description | This paper demonstrates how a currency board can become vulnerable to a crisis in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete information can result in multiple equilibria. In one class of equilibrium the policymaker has a credibility problem and maintaining the currency board is costly in terms of unemployment. If unemployment is persistent then pressure to devalue can build up over time until it becomes unbearable and the policymaker is forced to devalue. |
| first_indexed | 2024-03-06T23:14:22Z |
| format | Working paper |
| id | oxford-uuid:669a95ef-6a6c-426e-855f-f4bf7e7bcb7f |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T23:14:22Z |
| publishDate | 2001 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:669a95ef-6a6c-426e-855f-f4bf7e7bcb7f2022-03-26T18:32:56ZCurrency boards and currency Crises.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:669a95ef-6a6c-426e-855f-f4bf7e7bcb7fEnglishDepartment of Economics - ePrintsDepartment of Economics (University of Oxford)2001Irwin, GThis paper demonstrates how a currency board can become vulnerable to a crisis in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete information can result in multiple equilibria. In one class of equilibrium the policymaker has a credibility problem and maintaining the currency board is costly in terms of unemployment. If unemployment is persistent then pressure to devalue can build up over time until it becomes unbearable and the policymaker is forced to devalue. |
| spellingShingle | Irwin, G Currency boards and currency Crises. |
| title | Currency boards and currency Crises. |
| title_full | Currency boards and currency Crises. |
| title_fullStr | Currency boards and currency Crises. |
| title_full_unstemmed | Currency boards and currency Crises. |
| title_short | Currency boards and currency Crises. |
| title_sort | currency boards and currency crises |
| work_keys_str_mv | AT irwing currencyboardsandcurrencycrises |