Financial crises in emerging markets: a canonical model

摘要: We present a simple model that can account for the main features of recent financial crises in emerging markets. The international illiquidity domestic system is at center problem. Illiquid banks are necessary and sufficient condition to occur. Domestic liberalization capital flows from abroad (especially if short-term) aggravate increase their vulnerability exogenous shocks shifts expectations. A bank collapse multiplies harmful effects an initial shock, as credit squeeze costly liquidation investment projects cause real output drops collapses asset prices. Under fixed exchange rates, run on becomes currency central attempts act lender last resort.