ECON 455 Lecture 22 Financial Threats

ECON 455 Lecture 22 Financial Threats - Econ455 Economic...

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1 1 Econ455: Economic Development in China Lecture 22: April 4 Financial Threats Sandra Poncet Lorch Hall, room 207 Email: [email protected] Office Hours: Mondays 16:30-18 & Wednesdays 10:30-12 2 Introduction Financial crises are not unique to current financial systems, of course; history is replete with banking and exchange rate crises Typical distinction: A currency crisis may be said to occur when a speculative attack on the exchange value of a currency results in a devaluation (or sharp depreciation) of the currency, or forces the authorities to defend the currency by expending large volumes of international reserves or by sharply raising interest rates. A banking crisis refers to a situation in which actual or potential bank runs or failures induce banks to suspend the internal convertibility of their liabilities or which compels the government to intervene to prevent this by extending assistance on a large scale. Asian Crisis was a twin crisis The crisis problem is one of the dominant macroeconomic features of our age.
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2 3 Introduction Can China suffer from an Asian like crisis? How likely is a crisis in China? Need for a panorama of Chinese weaknesses and strengths Need for a comparison of comparison of Asian and Chinese finances. Need for identify the potential triggers for a financial crisis 4 Lecture Outline Introduction I How economists understand crises A Typical features of currency crises B Two generations of crisis before the Asian Crisis C The Asian Crisis II Is a crisis plausible in China? A Unlikelihood of an Asian type crisis B But numerous fragilities C Potential triggers Conclusion
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