Balance of Payments Crises and Capital Flows: The Role of Liquidity
AbstractA model of external crises is developed focusing on the interaction between liquidity creation by financial intermediaries and foreign exchange collapses. The intermediaries' role of transforming maturities is shown to result in larger movements of capital and a higher probability of crises. This resembles the observed cycle in capital flows: large inflows, crises and abrupt outflows. The model highlights how adverse productivity and international interest rate shocks can be magnified by the behavior of individual foreign investors linked together through their deposits in the intermediaries. An eventual collapse of the exchange rate can link investors' behavior even further.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 11.
Date of creation: Mar 1997
Date of revision:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Shankar, Rashmi, 2002. "Distinguishing between observationally equivalent theories of crises," Policy Research Working Paper Series 2926, The World Bank.
- Claudio Soto G. & Alberto Naudon D. & Eduardo López E. & Álvaro Aguirre R., 2004. "About International Reserve Adequacy: The Case of Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(3), pages 5-34, December.
- Michael P. Dooley & Inseok Shin, 1999.
"Private inflows when crises are anticipated: a case study of Korea,"
Federal Reserve Bank of San Francisco, issue Sep.
- Michael P. Dooley & Inseok Shin, 2000. "Private Inflows when Crises are Anticipated: A Case Study of Korea," NBER Working Papers 7992, National Bureau of Economic Research, Inc.
- Pierre-Richard Agenor & Joshua Aizenman, 1997.
"Contagion and Volatility with Imperfect Credit Markets,"
NBER Working Papers
6080, National Bureau of Economic Research, Inc.
- Pierre-Richard AgÃ©nor & Joshua Aizenman, 1998. "Contagion and Volatility with Imperfect Credit Markets," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 207-235, June.
- Joshua Aizenman & Pierre-Richard AgÃ©nor, 1997. "Contagion and Volatility with Imperfect Credit Markets," IMF Working Papers 97/127, International Monetary Fund.
- Shankar, Rashmi, 2005. "Insurance and liquidity : panel evidence," Policy Research Working Paper Series 3648, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda).
If references are entirely missing, you can add them using this form.