Currency Crises
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LINDSEY'S CURRENCY CRISIS.DOC:
Currency crisis:
Key terms:
-appreciation
-depreciation
-currency speculation
How people estimate currency:
-differences in inflation rates
-deviations from purchasing powers
-large account imbalances
-stress on exchange rate
Floating vs. Fixed exchange rate:
(with a fixed exchange rate economy is not flexible and will collapse easily)
Speculatatice attack (aka currency crisis)
2 possible reasons for currency crisis:
a. loss of reserves
b. loss of public patience
SOME economists argue that currency crisis are "self-fufilling" (ie, people cause them due to their withdrawl of funds)
What is a currency crisis?
- "currency crises" are usually attacks on the domestic currency that end with a large fall in its value.
- As opposed to: "banking crises" refer to bank runs or other events that lead to closure, merger, takeover, or large-scale assistance by the government to financial institutions.
- One or both can happen at once.
- What caused the currency crisis? (Ex: Thailand's Currency Crisis and Argentina's Currency Crisis)
- What are the effects? (Ex: Thailand's Currency Crisis - Effects and Argentina's Currency Crisis - Effects)
- How is a currency crisis dealt with? (Ex: Thailand's Currency Crisis - Solutions and Argentina's Currency Crisis - Solutions)
- What are the global effects? (i.e. ripple effect, cause-and-effect chains)
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Lindsey, Rachel, Marie, Jason, Sayo
