Interpreting Currency Crises: How Much Do We Know?

ABSTRACT

The main objective of this paper is to understand the causes and symptoms of currency crises by reviewing the seminal literature and noting some of its significant features. The paper revises the so-called first- and second-generation models and accounts for six different features. Based on this revision and account, the paper suggests the need to view currency crises beyond the traditional line of thought. In effect, to comprehend the process, which may lead to the inconsistency of the exchange-rate-maintenance policies and result in a currency crash.

KEYWORDS:

• Currency crises
• traditional theories
• significant features