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- Title
Banking crises in monetary economies.
- Authors
Jiang, Janet Hua
- Abstract
This paper analyzes the effect of inflation on banking crises in a model in which money and banks play essential roles. The model's equilibrium replicates some key features of actual banking crises, namely, the partial suspension of payments and the desire to hold cash even in the absence of pressing liquidity needs. When banks have access to a stable foreign currency, inflation has a threshold effect on banking crises: higher inflation reduces the likelihood of crises when inflation is below the threshold; the reverse happens when inflation exceeds the threshold. This result appears to be broadly consistent with available evidence.
- Subjects
CANADA; EFFECT of inflation on the banking industry; PRICE inflation; BANKING industry; FINANCE; LIQUIDITY (Economics); MONEY supply; ASSETS (Accounting); LIQUIDATION
- Publication
Canadian Journal of Economics, 2008, Vol 41, Issue 1, p80
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/j.1365-2966.2008.00456.x