THE ESSENCE OF CURRENCY CRISES OF THE THIRD GENERATION AND ANALYSIS OF THE FACTORS LEADING TO THEM IN THE CONTEXT OF THE CURRENT ECONOMIC AND GEOPOLITICAL SITUATION

Abstract

Purpuse – The aim of this study is to comprehend the essence of third-generation currency crises through an analysis of the model arising from the Asian crisis in 1997. The research focuses on the factors triggering these crises and their potential threats to countries, particularly within the context of the European Union.

Methodology – The study relies on the analysis of three generations of currency crises, with a specific emphasis on the third-generation model developed in the aftermath of the Asian crisis. The methodology encompasses a literature review, data analysis, and consideration of theoretical models created by economists such as Krugman and Obstfeld.

Findings – The analysis indicates that third-generation currency crises result from ineffective capital management, inadequate regulations, and excessive banking risks. Drawing on the example of the 1997 Asian crisis, where a massive influx of foreign capital led to a sudden devaluation of currencies and a loss of investor confidence, the findings suggest that despite post-Asian crisis actions and improvements, there remains a potential risk of third-generation currency crises, especially in the context of global economic changes.