A Survey on Recent Theories and Empirical Analyses Regarding Currency Crises -- The Role of Liquidity Provision as a Policy Measure in Currency Crisis Management --

CCL, established by IMF in 1999, and intra-regional swap agreements among the ASEAN+3 countries are considered to be frameworks for foreign liquidity provision when a country experiences a liquidity crisis. It is probable that such movements would see further progress in the future, involving more member economies (the members of already existing international organizations, regional members, members at different stages of economic development) and applying different schemes (fund lending, currency swaps, currency swaps by currency). The role of central banks in such an environment is likely to be an issue as well. Thus, having considered the situation, I believe it indispensable to thoroughly evaluate the importance of liquidity provision as well as the role that should be played by central banks. In this paper, as background material for such discussion, I have surveyed the theories and empirical analyses put forward to explain the outbreak of past currency crises, the aggravation of crises, and the mechanism that leads to a drop in total output of a crisis-hit country. As for the scope of the survey, I have mainly focused on the Asian currency crisis (1997), which shares the closest relation with our economy.