A model of crises in emerging markets
AbstractThis paper presents a "first generation" model of speculative attacks on emerging markets. Credit-constrained governments accumulate liquid assets in order to self-insure against shocks to national consumption. Governments also insure poorly regulated domestic financial markets. Given this policy regime, a variety of internal and external shocks generate capital inflows followed by anticipated speculative attacks. The model suggests that a common shock generated capital inflows to emerging markets in Asia and Latin America after 1989. Country-specific factors determined the timing of speculative attacks. Economic reform programs may also have generated capital inflow/crisis sequences.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 630.
Date of creation: 1998
Date of revision:
Other versions of this item:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-01-25 (All new papers)
- NEP-IFN-1999-01-25 (International Finance)
- NEP-MON-1999-01-25 (Monetary Economics)
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