A Model of the Joint Distribution of Banking and Exchange-Rate Crises

Flood, Robert P.; Marion, Nancy Peregrim

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A Model of the Joint Distribution of Banking and Exchange-Rate Crises

IMF Working Paper No. 01/213

32 Pages Posted: 14 Feb 2006

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Nancy Peregrim Marion

Dartmouth College - Department of Economics

Date Written: December 2001

Abstract

We develop a simple framework for studying the joint distribution of banking and currency crises triggered by real shocks. Our framework illustrates the fact that bank and currency collapses are related but they are not the same thing. Studying currency and bank collapses either in isolation or in perfect correlation with each other is inappropriate, producing biased estimates of the likelihood of crises.

Keywords: Currency crisis, bank crisis

JEL Classification: F30, F34

Suggested Citation: Suggested Citation

Flood, Robert P. and Marion, Nancy P., A Model of the Joint Distribution of Banking and Exchange-Rate Crises (December 2001). IMF Working Paper No. 01/213, Available at SSRN: https://ssrn.com/abstract=880887