A twin crisis model with incomplete information

This paper presents a model that highlights the connection between domestic bank runs and currency crises in a framework in which small depositors and a large trader engage in a simultaneous game. A long-term return on domestic technology affects the prospects of the bank and those of the domestic currency in the same direction. The presence of a large trader makes small depositors more likely to withdraw their money from the bank. The large trader's influence on the small traders is much larger, when he has more precise information than the small depositors. (C) 2003 Elsevier Inc. All rights reserved.