Year: 1999
Type: report
Abstract: We build a model of financial sector illiquidity in an open economy.Illiquidity -defined as a situation in which a country's consolidated financial system has potential short-term obligations in foreign currency that exceed the amount of foreign currency it can have access to on short noticecan be associated with self fulfilling bank and/or currency crises.We focus on the policy implications of the model, and study the role of capital inflows and the maturity of external debt, the way in which real exchange rate depreciation can transmit and magnify the effects of bank illiquidity, options for financial regulation, the role of debt and deficits, and the implications of adopting different exchange rate regimes.
DOI: 10.3386/w7272
Authors: Roberto Chang, Andres Velasco
Institutions: Federal Reserve Bank of Atlanta, New York University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122208142