NBER holds conference on Currency Crises.

• Position: National Bureau of Economic Research; Feb 6-7, 1998

To mark the conclusion of a project on "Currency Crises," the NBER held a conference on February 6 and 7 in Cambridge to hear the research reports of project participants. NBER Research Associate Paul R. Krugman, also of MIT, was director of the project and organizer of the conference. The following papers were presented:

Allan Drazen, NBER and University of Maryland, "Political Contagion in Currency Crises"

Discussant: Carmen Reinhardt, University of Maryland

Barry Eichengreen, NBER and International Monetary Fund, and Olivier Jeanne, Ceras, Paris, "Currency Crises and Unemployment: Sterling in 1931"

Discussant: Michael D. Bordo, NBER and Rutgers University

Robert Flood, International Monetary Fund, and Peter Garber, Brown University, "Is Launching the Euro Unstable in the Endgame?"

Discussant: Peter B. Kenen, Princeton University

Robert J. Gordon, NBER and Northwestern University, "Macroeconomic Responses in the 1992 Breakdown of the ERM"

Discussant: Paul R. Krugman

Sebastian Edwards, NBER and University of California, Los Angeles, and Miguel Savastano, International Monetary Fund, "The Morning After: The Mexican Peso in the Aftermath of the 1994 Currency Crises"

Discussant: J. Bradford De Long, NBER and University of California, Berkeley

Guillermo Calvo, University of Maryland, "Balance of Payments Crises in Emerging Markets: Large Capital Inflows and Sovereign Governments"

Discussant: Roberto Rigobon, MIT

Gian Maria Milesi-Ferreti, International Monetary Fund, and Assaf Razin, NBER and Tel Aviv University, "Reversals in Current Account Deficits and Currency Crises"

Discussant: Jaume Ventura, MIT

Jeffrey D. Sachs, NBER and Harvard University, and Steven Radelet, Harvard University, "The Onset of the East Asian Financial Crisis"

Discussant: Frederic Mishkin, NBER and Columbia University

Drazen argues that the political nature of a country's motivation for fixed exchange rates may be crucial in understanding contagious currency crises. Specifically, a fixed exchange rate may be a criterion for membership in a monetary union or less formal political-economic arrangement in which the value of being a member depends positively on the composition of the union. If one potential member devalues and hence is less likely to be a member of the "club," other potential members will assign a lower value to maintaining a fixed exchange rate, especially when doing so requires sacrificing domestic goals. Speculators may be uncertain about a country's...