01860cas a2200253 a 4500 AALejournalIMF000403 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451850987 1018-5941 BD-DhAAL BD-DhAAL Goldfajn, Ilan. Capital Flows and the Twin Crises : The Role of Liquidity / Ilan Goldfajn, Rodrigo Valdes. Washington, D.C. : International Monetary Fund, 1997. 1 online resource (32 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper develops a model that focuses on the interaction of liquidity creation by financial intermediaries with capital flows and exchange rate collapses. The intermediaries' role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis. These movements resemble the observed cycle in capital flows: large inflows, crisis and abrupt outflows. The model highlights how adverse productivity and international interest rate shocks may trigger a sudden outflow of capital and an exchange collapse. The initial shock is magnified by the behavior of individual foreign investors linked through their deposits in the intermediaries. The expectation of an eventual exchange rate crisis links investors' behavior even further. Mode of access: Internet Valdes, Rodrigo. IMF Working Papers; Working Paper ; No. 1997/087 Full text available on IMF http://elibrary.imf.org/view/journals/001/1997/087/001.1997.issue-087-en.xml IMF e-Library