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Abstract
Economic losses caused by currency crisis are spending the fiscal costs of restructuring the financial sector, a fall in economic activity, a distortion in distributable income, a decline in credibilityemphasize the importance of crisis prevention and the use of all available tools that can help in early identification of the financial weaknesses of the crises system. For this reason, some kind of systems could identify the vulnerability indicators or predict a currency crisis in order to take on time true measures to avoid the crisis.
The aim of the paper is underling the utilization of theoretical knowledge about currency crises and focusing on analyzing the causes for Venezuela currency crisis. the Evaluation of existing crises can explain the disruptions in the financial system or collapse of the exchange rate. Also, here we determinate the reasons and implications of Venezuela currency crisis, as the crucial role of the foreign exchange reserve for a country in such a circumstances.
Key words: currency crisis, factors, exchange rates, Venezuela.
1. Introduction
Currency crisis is a currency market disturbance where speculative foreign exchange strike leads to a devaluation or comes to a point when the authorities sell their foreign exchange reserves or raise interest rates to defend their exchange rate. Currency crises are usually defined in the context of the financial crisis, including a ban and debt crisis (Claessens and Kose, 2013). For the further analysis of currency crises, the definition of a banking and debt crisis is also important, which is mainly for two reasons. First, there are completely isolated cases of crises, since the characteristics of the currency crisis are often associated with other financial problems in the economy. For this reason, it is very difficult to isolate "same" currency crisis. Second, in many cases, some kind of crisis is developing into another type of crisis..
Utilizing theoretical knowledge about currency crises and focusing on the evaluation of existing theoretical models, over the last fifteen years, simultaneously were developed different theoretical models of currency crises in order to explain disruptions in the financial system or collapse of the exchange rate.
2. Literature review
In order to cover the whole process of creating a currency crisis, some assumptions of "Generation" models have been omitted, and introduced some...