Difference in the dynamics of banking and exchange crisis

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1. Consider two large economies, D and F, where D alone gets hit with a negative expected inflation shock. D's central banker is very inflation-fighting and wants to keep currency stability (fixed exchange rates), capital mobility, and monetary autonomy. Is it true that if F can sterilize successfully while D can't, D faces a 'trilemma'?

2. In the Asian Crisis model, what difference in the dynamics of banking and exchange crisis would there be if foreign banks allowed local emerging market banks to pay off their loans 50% in local currency.

Reference no: EM132606013

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