Of Economic Growth and Currency Crises ...

I think it is time for some theory here at Alpha.Sources or at least some suggestions to you, my dear reader, regarding some interesting references from the world of academic economics. In terms of the first topic in this post I am coming in a bit late in my recognition and praise of MIT's Darren Acemoglu's Introduction to Modern Growth which is a recently published (and downloadable for free in PDF format) draft of a macroeconomics textbook on modern economic growth or growth theory as we tend to call it. Now, as I have already hinted this grand piece (1,169 pages for crying out loud!) has already received wide praise from other parts of the blogosphere but I am sure that Acemoglu can do with some, as it were, "inter temporal" praise; mmm, the wonders of being a geek. Let me start out by pointing to how New Economist has already excellently covered this publication in two posts. As far as concerns my own review I am with Gabriel (from Economic Investigations) in the sense that I have not really had the time to dig into the book the way it clearly deserves. However, I am sure that this is very worth while to look closer into. I also agree with Gabriel that it is interesting in general to see how this stacks up to the current benchmark textbook on this area 'Economic Growth' by Barro and Sala-i-Martin. I have only read the first couple of chapters of Barro's and Sala-i-Martin's book and it is a very solid piece of work which is very rigorous although a bit too mathy for my taste. In many ways I am bit old-fashioned on this account and even though I love textbooks (my book shelve is fast becoming u-shaped as a result of them) I also like the odyssey like feeling you get when you e.g. begin with Solow's original paper and then work your way upwards through all those original contributions which have been handed us over the course of time. This is a journey I have yet to take and in any case I will be sure to have a much closer look at Acemoglu's book and so should you.

The second topic as is also revealed by the title is related to currency crises. In fact, as you may remember (or not :?) I made a promise in my recent post on Lithuania which specifically dealt with the exposure of the Lithuanian balance sheet towards a potential rattling of the Litas' peg to the Euro that I would provide you with a reading list on the topic of currency crises. Of course, such a list can never be exhaustive and complete but what follows are my suggestions. And no ... I have not read all of these papers; as is the case with growth theory this is a journey I have yet to take although I have read some of them. One thing in general to be aware of and this should be clarified from any basic international economics textbook (Obstfeld's and Krugman's is good) the so-called 'models' of currency crises are traditionally bagged along the spectrum of first, second and third(?) generation models.

(Do note that the majority of the papers are not available as such in the sense that they are walled as a result of subscription/membership rights demanded to access them).  

A good place to start although of course they don't include the very recent contributions is consequently the following two papers which provide a general sweeping look of the currency crisis literature; moreover both of these papers can be obtained for free from the links below.

Robert Flood and Nancy Marion (1998) - Perspectives on the Recent Currency-Crisis Literature (PDF)

Olivier Jeanne (2000) - Currency Crises: Perspectives on the Recent Theoretical Developments (PDF)

Moving on, you should of course not avoid the following classics;

Robert A. Mundell (1961) - A Theory of Optimum Currency Areas, The American Economic Review Vol. 51, No. 4

Robert A. Mundell (1963) - Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates, The Canadian Journal of Economic and Political Science Vol. 29, No. 4

Rudiger Dornbusch (1976) - Expectations and Exchange Rate Dynamics,  The Journal of Political Economy,  Vol. 84, No. 6

Paul Krugman (1979) - A Model of Balance-of-Payment crises, Journal of Money, Credit, and Banking Vol. 11, No. 3

And then we have the rest of the papers on my list which represent a mixed but, I am sure, very readable bunch (in chronologial order).

Maurice Obstfeld (1984) - Balance-of-Payments Crises and Devaluation, NBER Working Paper No. 1103

Maurice Obstfeld (1986) - Rational and Self-fulfilling Balance-of-Payments Crises, American Economic Review Vol. 76 Issue 1 

James B. Bullard (1991) - Collapsing Exchange Rate Regimes: A Reinterpretation, Working Paper 1991-003A; St. Louis Fed.

Giancarlo Corsetti, Paolo Pesenti, Nouriel Roubini (1998) - Paper Tigers? A Model of the Asian Crisis, NBER Working Paper No. 6783

Roberto Chang, Andres Velasco (1998) - Financial Crises in Emerging Markets, NBER Working Paper No. 6606

Craig Burnside, Martin Eichenbaum, Sergio Rebelo (1999) - Hedging and Financial Fragility in Fixed Exchange Rate Regimes, NBER Working Paper No. 7143

Craig Burnside, Martin Eichenbaum, Sergio Rebelo (1999) - Prospective Deficits and the Asian Currency Crisis, PDF taken from the World Bank.

Paul Krugman (1999) - Balance Sheets, the Transfer Problem, and Financial Crises, International Tax and Public Finance Volume 6, Number 4 

Roberto Chang, Andres Velasco (1999) - Liquidity Crises in Emerging Markets: Theory and Policy, NBER Working Paper No. 7272

Philippe Aghion, Philippe Bacchetta and Abhijit Banerjee (2000) - Currency Crises and Monetary Policy in an Economy with Credit Constraints, Working Paper No. 00.07 from Foundation of the Swiss National Bank

Philippe Aghion, Philippe Bacchetta and Abhijit Banerjee (2000) - A simple model of monetary policy and currency crises, European Economic Review Volume 44, Issues 4-6 

Philippe Aghion, Philippe Bacchetta and Abhijit Banerjee (2001) - A CORPORATE BALANCE-SHEET APPROACH TO CURRENCY CRISES (PDF), Working Paper No. 01.05 from Foundation of the Swiss National Bank

Sylvester Eijffinger and Benedikt Goderis (2005) - Currency crisis, monetary policy, and corporate balance sheet vulnerabilities, No 113, Discussion Paper from Tilburg University, Center for Economic Research

Of course I am missing something here so please feel free to add links in the comments to make the list complete or near to complete that is.