This paper is an application of Flow-of-Funds analysis to the case of Thailand during the 1996-97 Asian crisis. It begins with a background historical sketch of the financial crisis in East Asia, emphasizing the central role of weak financial systems and foreign debt. The paper then presents a...

We study market illiquidity in an economy subject to non-fundamental shocks. Asset trading occurs via decentralized one-on-one bargaining. The model has multiple rational expectations equilibria; we associate certain Pareto inferior equilibria with liquidity crises. The government can improve...