DOMESTIC AND EXTERNAL FACTORS OF CURRENCY CRISES

Abstract

The aim of this paper is to explain the essence and basic causes of currency crises in the last decade of the twentieth century. In doing so, we won’t dwell on the description of the crisis of individual countries. We will analyze the aggregate (essential) factors which determine and encourage the development of currency crises. Research shows that poor macroeconomic policies and adverse external shocks are the most important and the most common factors of currency instability. These are the following determinants which are often associated: long retention of appreciated exchange rate, the bad conduct of monetary policy in a fixed exchange rate regime and the negative impact of speculative capital.