Hedging and Financial Fragilities in Fixed Exchange Rate Regimes
AbstractCurrency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there is a lending boom before the crises. Finally, when the currency/banking collapse occurs interest rates rise and there is a persistent decline in output. This paper proposes an explanation for these regularities.
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Bibliographic InfoPaper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 461.
Length: 57 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.
BANKS ; EXCHANGE RATE ; FINANCIAL MARKET;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-04-26 (All new papers)
- NEP-DGE-2000-04-26 (Dynamic General Equilibrium)
- NEP-FMK-2000-04-26 (Financial Markets)
- NEP-IFN-2000-04-26 (International Finance)
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