Research On Currency Crisis And Its Formation Mechanism

Currency crises arose and outbroke continuously in nearly half a century, causinggreat damage to the countries where they happened. Therefore, countries andinternational economic organizations are striving for researching on them, whichappear to become a hot topic in the field of international finance.Currency crises, which in the broadest sense mean that one currency, fluctuateover a certain range in short-term. In narrow terms, it means that speculators attackand crash the fixed exchange regime through the foreign exchange market, and makethe currency which they attack go on a wild ride. Currency crises theories were bornin early1980s, and evolved into three generations of theories in some decades. Theearliest generation focused on the fundamental factors in domestic. It regarded thecurrency crises as the consequence of the conflict between domestic policies and fixedexchange regime. The second generation was greatly looking at the crises themselves,information symmetry and public confidence. The third generations varied, butobviously shift its emphasis to microcosmic view, especially on the relationship offinancial organizations and enterprises. However, in exhaustible new types ofcurrency crises gradually made them incomplete and unpersuasive. On the other hand,new types of crises fascinate economists to continually study and discover.This paper includes five sections. The first part is the introduction, whichintroduces the background and significance, research at home and abroad and theresearch contents and creative points; the second part presents numerous currencycrises since the Bretton Woods System established, in which is divided into two partsby the time of the collapse of the System. The former parts is the USD-gold crisisunder fixed exchange regime, while the latter is the crises caused by fiscal and tradebalance conditions under float exchange regime; The third part is the mechanism ofthe traditional theories of currency crises which include first and second generationstheory. The fourth part take the1997southeast Asia crises into account, cover thefrontline theories of currency crises which is consist of exemption clause model,moral hazard model, liquidity crisis theory and the balance sheet model; The fifth partintroduce the method of setting up a rigorous system for predicting and tacklingcurrency crises and how Chinese government could act to prevent the untraditionalappreciation currency crises.