Chang, Chia-Ying2013-09-242022-07-0520132013-09-242022-07-0520132013https://ir.wgtn.ac.nz/handle/123456789/18795This paper sheds light on the linkages between banking crises and sudden stops and discusses the effectiveness of short-run lending in their prevention. It develops an overlapping generations framework and incorporates the possibilities of bank runs and moral hazard of financial intermediaries. Consequently, I find that the strategy to overcome liquidity problems could worsen banks’ positions and cause bank runs and sudden stops. A small liquidity shock may still lead to a banking crisis through the depositors’ expectation. A large shock would require short-run lending to prevent an immediate bank run, but the repayment obligation may worsen moral hazard problems.pdfen-NZhttp://www.victoria.ac.nz/sef/research/sef-working-papersBanking crisesSudden stopsMoral hazardShort-run lendingCapital flowsTexthttp://www.victoria.ac.nz/sef/research/sef-working-papers