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On the Fundamentals of Self-Fulfilling Speculative Attacks / Craig Burnside, Martin Eichenbaum, Sergio T. Rebelo.
- Format:
- Book
- Author/Creator:
- Burnside, Craig.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w7554.
- NBER working paper series no. w7554
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2000.
- Summary:
- This paper proposes a theory of twin banking-currency crises in which both fundamentals and self-fulfilling beliefs play crucial roles. Fundamentals determine whether crises will occur. Self-fulfilling beliefs determine when they occur. The fundamental that causes twin crises' is government guarantees to domestic banks' foreign creditors. When these guarantees are in place twin crises inevitably occur, but their timing is a multiple equilibrium phenomenon that depends on agents' beliefs. So while self-fulfilling beliefs have an important role to play, twin crises do not happen just anywhere. They happen in countries where there are fundamental problems - problems such as guarantees to the financial sector.
- Notes:
- Print version record
- February 2000.
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