Chapter 12

International Financial Crises*

Guido Lorenzoni,    Northwestern University, Evanston, IL, USA, National Bureau of Economic Research, Cambridge, MA, USA


This chapter surveys recent research on international financial crises. A financial crisis is characterized by a sudden, dramatic outflow of financial resources from an economy with an open capital account. This outflow may be primarily driven by the expectation of a large nominal devaluation, in a situation in which the domestic monetary-fiscal regime appears inconsistent with a fixed exchange rate. Or the outflow may be driven by a reallocation of funds by foreign and domestic investors, due to a changed perception in the country’s growth prospects, to an increase in the ...

Get Handbook of International Economics now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.