Third-generation currency crises models argue that capital losses from exchange-rate depreciation propagate the to productive sector. To test these models, we use a firm-level dataset allows us measure mismatches around 2002 Brazilian crisis. We find that, between 2001 and 2003, firms shortly before crisis had large decreased their investment rates by 8.1 percentual points, relatively other pub...

This paper analyses predictions of a simple model of currency crises in which the peg will be abandoned when the currency overvaluation hits a certain threshold, unknown to the agents. Due to learning about the threshold, some features usually observed in the data and identified with models with multiple equilibria arise in the model. But the model yields distinctive predictions about the behav...

This paper integrates a number of recent themes in the literature on banking and asset markets–optimal risk sharing, limited market participation, asset-price volatility, market liquidity, and Þnancial crises–in a generalequilibrium theory of the Þnancial system. A complex Þnancial system comprises both Þnancial markets Þnancial institutions. Financial institutions can take the form of intermed...