Currency and banking crises have emerged jointly in many developing countries in recent years. This papers examines theoretical and empirical studies that consider links between currency and banking crises. In theory, both economic fundamentals and self-fulfilling expectations can contribute to emergence of these twin crises. It seems that financial liberalization plays an important role in emergence of twin crises. Financial liberalization with poor regulation and weak supervision can creates financial fragility. Furthermore, implicit or explicit goverment guarentees to bail-out the financial system may increae this fragility. On the other hand, a pegged exchange rate regime in such a financally liberalized environment, may make an economy vulnerable to a currency crises. The interaction between financial fragility and vulnerability to currency crises may increases severity of twin crises.
Key words: na Article Language: EnglishTurkish
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