Econ310_Notes20101207

Econ310_Notes2010120 - Econ310 004 Definitions exchangeratecrisis();drain ;whenbank

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International Banking Crises (12/7/2010) Econ 310- 004 Definitions exchange rate crisis  – (aka balance of payments crisis) big depreciation in the currency; drain  of foreign reserves forcing a devaluation or switch to float banking crisis  – bank panics leading to massive bank failures; when banks and other  institutions face losses, insolvency, and bankruptcy default crisis  – government default on sovereign debt; when governments are unwilling or  unable to honor principal/interest payments on their debt twin crisis  – 2/3 of exchange rate, banking, and default crises triple crisis  – 3/3 of exchange rate, banking, and default crises currency premium  – exchange rate risk premium; higher interest rate that must be paid to  compensate for possibility of fluctuations in the exchange rate (i.e., the peg is not credible) country premium  – default risk premium; higher interest rate that must be paid to compensate  for possibility of government expropriation of private investment or default on sovereign debt
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This note was uploaded on 01/26/2011 for the course ECON 310 taught by Professor Staff during the Fall '08 term at George Mason.

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Econ310_Notes2010120 - Econ310 004 Definitions exchangeratecrisis();drain ;whenbank

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