Book contents
- Frontmatter
- Contents
- List of Figures, Tables, and Boxes
- Preface
- Acknowledgments
- Abbreviations
- 1 Introduction
- 2 Bretton Woods
- 3 Transitions
- 4 The Debt Crisis
- 5 Global Finance Redux
- 6 Currency Crises
- 7 The Widening Gyre
- 8 Fiscal Follies
- 9 Lessons Learned
- 10 The Great Recession
- 11 The World Turned Upside Down
- Appendix: IMF Data
- References
- Index
6 - Currency Crises
Published online by Cambridge University Press: 05 December 2012
- Frontmatter
- Contents
- List of Figures, Tables, and Boxes
- Preface
- Acknowledgments
- Abbreviations
- 1 Introduction
- 2 Bretton Woods
- 3 Transitions
- 4 The Debt Crisis
- 5 Global Finance Redux
- 6 Currency Crises
- 7 The Widening Gyre
- 8 Fiscal Follies
- 9 Lessons Learned
- 10 The Great Recession
- 11 The World Turned Upside Down
- Appendix: IMF Data
- References
- Index
Summary
Future historians may, in fact, dub this the Age of Currency Crises: never before, not even in the interwar period, have currency crises played such a central role in world affairs....Currency crises – both crises that actually do happen and the sometimes desperate efforts of national governments and international agencies to head them off – have become a defining force for economic policy in much of the world.
Krugman (2000:1)The wave of financial globalization during the early and mid-1990s was accompanied by crises that demonstrated the volatility of capital flows. This chapter describes the European currency crisis of 1992–3 and the Mexican crisis of 1994–5. These events revealed that capital inflows could be quickly reversed and pose a threat to financial stability by undermining exchange rate commitments.
The background and outbreak of the European crisis are presented in the first section. European governments had formed a fixed exchange rate pact in the 1980s as part of a move toward deeper economic integration within the EC and strengthened their ties in the 1990s. But increases in German interest rates put pressure on the exchange rate pegs and demonstrated how fixed rates and unregulated capital could constrain national policies. Most of the governments subsequently proceeded with the introduction of the euro, although the United Kingdom withdrew from the arrangement.
- Type
- Chapter
- Information
- The IMF and Global Financial CrisesPhoenix Rising?, pp. 88 - 104Publisher: Cambridge University PressPrint publication year: 2012