Anatomy of a Twin Crisis
AbstractThe author presents a model of a twin crisis, in which foreign and domestic residents play a banking game. Both "honest" and run equilibria of the post-deposit subgame exist; some run equilibria lead to a currency crisis, as agents convert domestic currency to foreign currency. In the subgame, sunspot variables can affect the equilibrium. The author calculates the unique equilibrium of the game numerically, taking into account the possible realizations of the sunspot variables. He also calibrates the model to the Turkish economy, providing insight into the Turkish twin crisis of 2001.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 03-41.
Length: 44 pages
Date of creation: 2003
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Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F30 - International Economics - - International Finance - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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