Sequential Financial Crisis Scenario


Seminar Paper, 2009

7 Pages, Grade: 2,0


Abstract or Introduction

Global imbalances in financial markets, especially the current account deficit in the US and the high foreign reserves in Asian countries, are considered to have influenced the housing bubble in the USA and other Western countries. This research proposal establishes a link between the twin crises in Asia starting in 1997 and the current need of central banks in this region to accumulate so called „hard currencies“ like the US Dollar and the Euro. In the following we focus on the theory of sudden stops and introduce a second
element that describes a run on the foreign reserves of the central bank. Firstly, agents in the economy run on domestic banks and change bank deposits into domestic currency. Secondly, they escape into hard currencies because they fear that exchange rate movements lower the real value of the domestic currency. This challenges foreign reserves of central banks, such that the central bank finally cannot provide any additional foreign reserves to the domestic banking system. To guarantee that foreign reserves are sufficient for all agents in the country central banks started building up large foreign reserves to self-insure against financial fragilities.

Details

Title
Sequential Financial Crisis Scenario
College
European University Institute
Grade
2,0
Author
Year
2009
Pages
7
Catalog Number
V182527
ISBN (eBook)
9783656062028
File size
681 KB
Language
English
Keywords
Financial Crisis, Asia, Capital flows
Quote paper
Moritz Meyer (Author), 2009, Sequential Financial Crisis Scenario, Munich, GRIN Verlag, https://www.grin.com/document/182527

Comments

  • No comments yet.
Look inside the ebook
Title: Sequential Financial Crisis Scenario



Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free