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Why are some currency crises followed by economic contractions while othersare not? This paper is an attempt at answering this query. In particular, weinvestigate two closely related questions. First, we explore whether there is adifference in the output effects of a devaluation during “normal” periods versuscrises ones; after all, during non-crisis periods, real exchange devaluation is seenas an important policy option for promoting exports and output growth. Yet, theliterature has not made a distinction between crisis and non-crisis periods. Topreview the main conclusion, we find that the contractionary effects tend to existonly during the crisis period. Building on this, we go on to explore the factors thatcause a crisis-induced devaluation to be contractionary. JEL classification: F34, F41, F42