In this paper we show how interbank market frictions can play an important role in propagating and enhancing the effects of shocks in a currency union, and discuss the efficacy of two unconventional policy measures; multi-period central bank refinance operations and large scale asset purchases....

This paper develops an empirical framework to determine if the Asian currency crisis was contagious, and if so, whether the contagion was warranted or unwarranted. By applying a monetary-portfolio model to monthly data for 1991-1998, our results show that short-run variations in exchange rates...

The global financial crisis of 2007-2008 had a negative impact on many countries, including Vietnam. Many policies have been applied to stabilize the macro-economic indicators. However, most of them are based on old qualitative models, which do not help policy makers understand deeply how each...

Market distress can be the catalyst of a deleveraging wave, as in the 2007/08 financial crisis. This paper demonstrates how market distress and deleveraging can fuel each other in the presence of adverse selection problems in asset markets. At the core of the detrimental feedback loop is agents'...

As reliance on excessively short-term wholesale funding has been one of the major causes for the 2007-2009 financial crisis, recent advances in global liquidity regulation try to curb the excessive reliance on short-term wholesale funding without being clear on how such an approach will affect...

This paper incorporates banks and banking panics within a conventional macroeconomic framework to analyze the dynamics of a financial crisis of the kind recently experienced. We are particularly interested in characterizing the sudden and discrete nature of the banking panics as well as the...