The Collapse of Exchange Rate Regimes: Causes, Consequences and Policy Responses

ical) and to self-fulfilling currency crisis, respectively. Research stressing the former approach was pioneered by Krugman (1979) and Flood and Garber (1984). According to this line of research, the failure of governments to adopt domestic monetary and fiscal policies consistent with their stated exchange rate targets leads to a gradual diminution of reserves and eventually a sk adjustment that depletes reserves suddenly in one attack (Sachs, Tornell, and Velasco, 1996, page 47). The resul...