Abstract

LAGO, Fernando. Tres ensayos sobre crisis financieras basadas en fundamentals. Estud. Econ. [online]. 2005, vol.22, n.45, pp. 1-66. ISSN 2525-1295.

This Thesis consists of three theoretical essays on financial crises. The models developed on each essay share a common formal structure: a simple representation of bank runs caused by weak fundamentals, based on Diamond y Dybvig's model (1983). This single framework is adapted to study three different topics: The first essay evaluates the welfare effects of the inclusion of a clause of suspension of convertibility in the standard demand deposit contract, proving that even if this clause cannot prevent a crisis, under certain conditions it may improve the agents' welfare. The second essay analyzes how imperfect information about the quality of the fundamentals of the economy and the exchange rate regime may affect the likelihood of a twin crisis (a banking crisis and a currency devaluation at the same time). It's proved that bank runs are more probable when the quality of market information available to investors is poor. A banking crisis can lead to a currency crisis if the amount of reserves held by the central bank is low. If investors expect a devaluation, they will require higher interest rates for not withdrawing their funds, therefore increasing the probability of a bank run. Finally, the likelihood of a bank run is compared under two alternative exchange rate regimes (fixed rate and flexible rate), concluding that financial fragility is higher under a fixed rate regime. Lastly, the third essay studies the relationship between financial depth and the volatility of the main real macroeconomics variables in a context of financial liberalization. Using Monte Carlo simulations It's shown that although a financial liberalization usually increases financial depth, the magnitude of the variation in depth is negatively affected by the degree of real volatility.

Keywords : Portfolio choice; Complete information; Banking crisis; Foreing exchange.