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Article
Shadow rates and multiple equilibria in the theory of currency crises
Journal of International Economics (2000)
  • Lilia Cavallari, University of Rome III
  • Giancarlo Corsetti, European University Institute
Abstract
This note generalizes to second generation models of currency crises the arbitrage-based approach first applied by Flood and Garber to first generation models. Deriving policy-switching rules based on the ‘shadow exchange rate’ facilitates the comparative analysis of the literature. Using the ‘shadow rate’, we provide and discuss an example of a common mechanism generating multiple equilibria in both first and second generation models.
Disciplines
Publication Date
August, 2000
Citation Information
Lilia Cavallari and Giancarlo Corsetti. "Shadow rates and multiple equilibria in the theory of currency crises" Journal of International Economics Vol. 51 Iss. 2 (2000)
Available at: http://works.bepress.com/lilia_cavallari/5/