Kiel Working Papers, Kiel Institute for World Economics
No 1106:
An Iron Law of Currency Crises: The Divergence of the Nominal and the Real Exchange Rate and Increasing Current Account Deficits
Horst Siebert
Abstract: The currency crises of the 1990s all exhibit a divergence
of the nominal and the real exchange rate together with an increase in the
negative current account. The nominal rate does not reflect inflation
differences fully and the ensuing real appreciation leads to a negative
current account. This pattern holds for the Czech, the Mexican, Brazilian,
Argentinian as well as the South Korean currency crises. It seems to be an
iron law of currency crises.
Keywords: Currency Crisis, Real Exchange Rate, Devaluation; (follow links to similar papers)
JEL-Codes: E0; F3; (follow links to similar papers)
14 pages, May 2002
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