The Relationship between Fiscal Sustainability and Currency Crises in Some Selected Countries

Alexis Cruz-Rodríguez

doi:10.2478/revecp-2013-0008

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The Relationship between Fiscal Sustainability and Currency Crises in Some Selected Countries

Review of Economic Perspectives

Volume 13 (2013): Issue 4 (December 2013)

By: Alexis Cruz-Rodríguez

Open Access

|Jan 2014

Abstract

The aim of this article is to assess whether a Fiscal Sustainability Indicator (FSI) can be used to predict the probability that a currency crisis occurs. The FSI developed by Croce and Juan-Ramón (2003) is employed. Two different definitions for currency crises are used to evaluate whether they induce different results in the analysis. In general, the results suggest that the lagged FSI has an explanatory power over currency crises in some countries.

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