Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/100729 
Year of Publication: 
1999
Series/Report no.: 
Working Paper No. 99-15
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
Abstract: 
We build a model of financial sector illiquidity in an open economy. Illiquidity is defined as a situation in which a country's consolidated financial system has potential short-term obligations that exceed the amount of foreign currency available on short notice. We show that illiquidity is key in the generation of self-fulfilling bank and/or currency crises. We discuss the policy implications of the model and study issues associated with capital inflows and the maturity of external debt, the role of real exchange depreciation, options for financial regulation, fiscal policy, and exchange rate regimes.
Subjects: 
Financial crises
Foreign exchange
Capital movements
Liquidity (Economics)
Document Type: 
Working Paper

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