Q: Argentina during 2018 experienced a balance of payments crisis, where there were large expectations of a devaluation and the central bank intervened in the foreign exchange market trying to, unsuccessfully stop the currency from depreciation.

a.Show this scenario using a figure of the assets market model (Hint: Notice that this situation is slightly different from a balance of payments crisis under a fixed exchange rate system).

b.Explain how this type of crisis might spillover into a sovereign debt crisis if the sovereign has an important amount of debt denominated in foreign currency.

c. Explain how this type of crisis might spillover into a banking crisis if part of the domestic bank's deposits is denominated in foreign currency.