Basically three types of models have been developed in an attempt to explain the genesis of a large number of currency crises that occurred in the 1980's and the 90's. The 1st generation models which emphasized the importance of deterioration of the fundamentals in explaining the onset of the crises were followed by the 2nd generation currency crisis models that came to vogue in the wake of the 1994 Mexican crisis, which models noted that the fundamentals are very rarely --if ever-- so weak as to necessarily trigger a crisis and which emphasized the key role of market expectations and of the dynamics of "self fulfilling prophecy" in precipitating the crisis. Later, the 3rd generation models were develloped in an attempt to explain the relations between currency and banking crises, in particular in the context of the East Asian crisis of 1997. This article summarizes these three types of currency crisis models and their main conclusions.
Key words: Currency Crises, Banking Crises, Self Fulfilling Prophecy Article Language: EnglishTurkish
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