Currency crisis is a kind of financial crisis, which refers to the situation that the impact on a currency leads to a sharp depreciation of the currency or a sharp decline in international reserves. It includes both a successful impact on a currency (that is, it leads to a sharp depreciation of the currency) and an unsuccessful impact on a currency (that is, it only leads to a sharp decline in the country's international reserves but does not lead to a sharp depreciation of the currency). For every country, the degree of currency crisis can be measured by the foreign exchange market pressure index, which is the weighted average of the monthly change rate of exchange rate (calculated by direct quotation) and the reciprocal of the monthly change rate of international reserves. When the index exceeds three times the mean square deviation, it is regarded as a currency crisis.

According to the past currency crisis, there are several theories in economics that can explain this crisis:

1, corresponding to the debt crisis in Latin America in the 1980s, produced the theory that fiscal deficit led to currency crisis. Its theoretical mechanism is that the increase of fiscal deficit will promote inflation, which will lead to the increase of export cost, the deterioration of terms of trade and the increase of current account deficit. When the country's foreign exchange reserves are reduced to a certain extent, the authorities cannot peg the exchange rate. At the same time, the public can also see the coming collapse, and the demand for real money balance will be reduced, which will have a speculative impact on the central bank's foreign exchange reserves, thus triggering a sudden depletion of foreign exchange reserves.

2. 1992 The pound crisis produced the theory of currency crisis caused by the inconsistency of domestic and international economic cycles. According to this theory, the internal conflict between a country's monetary policy and exchange rate policy caused by the inconsistency of economic growth cycles between countries is the most fundamental reason for the currency crisis. Under the condition of open economy, when a country adopts the pegged exchange rate system, the central bank must maintain the stability of its currency through interest rate policy. However, if the economic cycle of the country is inconsistent with that of the countries pegged to the currency, it will lead to the contradiction between the exchange rate and the interest rate level. When speculators notice that it is difficult for the government to maintain the pegged exchange rate, they will attack the country's currency.

3. The theory that foreign hot money shocks lead to currency crisis can explain Mexico's monetary and financial crisis in the mid-1990s. According to this theory, countries that implement free convertibility of capital account, but the domestic economic operation is not perfect, often attract a large number of short-term foreign capital, which is mainly hot money specialized in currency and securities market speculation. The direct investment of multinational companies really engaged in industrial activities is very scarce. The consequences are self-evident.

4, macroeconomic policy mistakes lead to monetary and financial crisis. From 65438 to 0997, the monetary and financial crisis in Southeast Asia was caused by improper macroeconomic policies or rigid systems, which led to problems in some aspects of the macro-economy, and then led to the collapse of foreign exchange markets and stock markets. The fundamental reason lies in the rigid exchange rate mechanism and fragile banking system in Southeast Asian countries.

Second, the choice of macroeconomic policies to avoid the currency crisis

Although the currency crisis is closely related to the economic cycle, it is not absolutely inevitable. Among them, it is of great significance to formulate appropriate exchange rate policies and other macroeconomic policies.

1. Manage the internal economic environment and strengthen the coordination of local and foreign currency policies. Fundamentally speaking, the right to brake the impact of foreign speculative capital lies in implementing correct fiscal, monetary and exchange rate policies, improving the domestic economy itself and improving the resistance of the domestic economy.

Monetary policy should be firm to prevent further excessive devaluation of the currency. The endless decline of the currency will not only cause the evil consequences of domestic inflation, but also cause great pressure on the balance of payments of domestic financial institutions and non-financial enterprises with foreign loans. In addition, we should also focus on solving the weaknesses in the financial sector. In many cases, weak but viable financial institutions must be rebuilt and capitalized, while those unable to repay their debts need to be closed or merged by the strong.

In terms of foreign exchange policy, it is necessary to implement exchange rate target zone management and increase exchange rate flexibility to reduce the impact of international capital flows on the domestic economy. Under the background of floating exchange rate becoming the mainstream of monetary system in various countries, the exchange rate system closely linked to a currency faces a series of problems: the strength of the local currency directly depends on the economic performance of the pegged country; In the case of huge differences in economic structure and unbalanced economic development between the two countries, the function of interest rate as a tool of domestic monetary policy is obviously weakened; Pegging the exchange rate system requires the formulation and implementation of domestic monetary policy, and must take exchange rate stability as the primary goal, which will reduce the impact on the domestic economy and even run counter to the requirements of the domestic economy. Therefore, strictly pegging the exchange rate often seeks exchange rate stability at the expense of domestic economic stability. When the domestic economic situation is not good, the exchange rate will tend to depreciate. If the exchange rate is not lowered in time, it will definitely give speculators an opportunity and may have unexpected consequences.

2. The opening of capital account and even the whole financial market should not be rushed. The internationalization of financial markets has both favorable and unfavorable effects on the economies of the countries where the markets are located and the whole world. On the one hand, it improves the operating efficiency of the financial market, promotes the free flow and rational allocation of capital in the world, and promotes the development of international trade and international credit investment; On the other hand, it weakens the autonomy of the central bank's monetary policy in sovereign countries, deepens the contradictions and frictions between countries, facilitates the flow of speculative capital, intensifies the excessive flow of financial asset prices and the turmoil in financial markets, thus increasing the fragility of the financial system and the possibility of financial crisis. The practice of Southeast Asian countries has proved that opening the capital account prematurely will make the domestic economy vulnerable to the impact of international hot money.