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Carry Trades and Financial Crisis : An Analytical Perspective

Wanaguru, Sumila Tharanga - 2011

This paper develops an analytical framework to explain how a liquidity shock or a shock to the aggregate haircut on … exogenous noise, the model shows that a liquidity shock leads asset prices and the exchange rate to depart from the steady state … level, triggering a financial crisis. Further, a negative shock to the interest rate differential also has the potential to …

Persistent link: https://www.econbiz.de/10013120097

Private and public information in self-fulfilling currency crises

Bannier, Christina E. - 2000

Persistent link: https://www.econbiz.de/10001525769

Private and public information in self-fulfilling currency crises

Bannier, Christina E. - 2000

This paper analyzes the implications of currency crises in a model with unique equilibrium. Starting from a typical multiple equilibria model with self-fulfilling expectations we introduce noisy information, following Morris/Shin (1999). Under certain conditions for the noise parameter, all...

Persistent link: https://www.econbiz.de/10010504306

Defending against speculative attacks

Danie͏̈ls, Tijmen; Jager, Henk; Klaassen, Franc - 2009

While virtually all currency crisismodels recognise that the fate of a currency peg depends on how tenaciously policy makers defend it, they seldom model how this is done. We incorporate themechanics of speculation and the interest rate defence against it in the model ofMorris and Shin (American...

Persistent link: https://www.econbiz.de/10003814475