A theoretical overview of the first and second generation models of currency crises

Abstract

This study reckons a comprehensive and holistic overview of first and second generation models of currency crises. The main characteristics and assumptions of these models are portrayed and the motives behind these models are illustrated. By and large, the seminal papers which have been sources of inspiration for the evolution of the currency crisis theory are demonstrated in detail. Moreover, incorporations of various elements from economic theory into these models and extensions are discussed briefly. Finally, a very basic intuition about how successful these models are in giving explanations of currency crises that countries have experienced is given.