| This paper will be targeted on investigating the correlation between debt crisis and currency crisis by means of the theoretical model and empirical analysis. Through reviewing the related literature in the past, we have found that the previous studies about the correlation between these two kinds of crises usually were empirical analysis. Limited to the sample availability and subjectivity, predecessors’research did not come to a unified conclusion. Is there a positive or negative correlation between these two crises? It is still a problem worthy of deeply thinking. In this paper, on the basis of Bauer, Herz and Karb (2003), we will take the default option and depreciation option into government financing selection model. Then considering the economic fundamentals and expectations of investors, we will further study the correlation under different financing options combination.It is a remarkable fact that the developed countries have stronger economic power to pay for its sovereign debt than developing countries, in the real world, default most likely happens in developing countries. Therefore, this paper mainly aims at using a Probit-model to estimate the correlation of both crises in reality, with the1975-2010data from46developing countries. We found that, between the debt crisis and currency crisis, there is a significant positive correlation. At the same time, compared with the lagged first order of the debt crisis’s influence on future currency crisis, occurrence of the lagged first order of currency crisis significantly increased the incidence of the future debt crisis.The U.S. debt crisis has been a world-wide concern once again, after the government’s action to raise the debt-ceiling in the October,2013. Hence, we choose the US debt crisis as the analysis object. First of all, we make a brief summary on the history of the U.S. Treasury debt, and summarize its present characteristics. Then, we make the theoretical analysis to discuss the possibility of U.S. debt default and the sustainability of the debt monetization. Studying the U.S. debt as well as the U.S. dollar depreciation has important practical significance. The U.S. treasury bonds and the U.S. dollar today are still occupying the core position of the international financial system, at the same time, the U.S. treasury market is still the most liquid and largest asset market in the world. If there is a U.S. debt default or large-scale dollar devaluation, it will make a huge negative impact on the current and future world economy. In the meantime, the U.S. debt default will cause huge losses to countries like China, which holds a large amount of U.S. treasury bonds.After all the above discussion, we hope to make further studies on the correlation between these two kinds of crises on the basis of theoretical and empirical analysis, in the meantime, help to give instructions in averting or addressing the crises in real life. |
