BoJ paper: ‘Sudden stop' central factor in recent financial crises
The concept of liquidity crunch, or 'sudden stop', helps to explain several issues, such as why a credit boom may precede financial crisis, why capital inflows grow in the run up to balance-of-payments crises, and why gross flows are pro-cyclical, that are not addressed by conventional monetary theory, according to a Bank of Japan research paper.
Puzzling over the anatomy of crises: liquidity and the veil of finance by Guillermo Calvo, presents empirical evidence suggesting a key channel from
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