Title: Prospective deficits and the Asian currency crisis
First published: 1998
Description: The recent Asian currency crisis was caused by large prospective fiscal deficits associated with implicit bailout guarantees to failing banking systems.  Absent the political will to raise taxes or cut spending, governments must resort to seignorage revenues to pay for the bailout of the banking system.  In a world of forward-looking agents, this makes a currency crisis inevitable.
Subjects: Econometric models, Financial crises, Budget deficits, Bank reserves, Foreign exchange rates, Bank failures, Government policy, Banks and banking
Places: Asia