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Perspective Paper on Financial Instability

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  • Henry, Peter B.

    (Stanford U)

Abstract

Financial instability is a major problem for the world's middle-income developing countries. Barry Eichengreen's proposal for dealing with the problem treats currency mismatches--the fact that developing countries borrow in dollars instead of their own currency--as the principal cause. I argue that institutional flaws, with monetary and fiscal policy for example, drive financial instability and also account for countries' inability to place local-currency denominated debt contracts. Since weak institutions are to blame, efforts to help countries build stronger institutions will likely yield greater benefits than narrow attempts to address currency mismatches per se.

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Bibliographic Info

Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1866.

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Date of creation: Aug 2004
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Handle: RePEc:ecl:stabus:1866

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  1. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
  2. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  3. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 9-30, Fall.
  4. Peter Blair Henry & Peter Lombard Lorentzen, 2003. "Domestic Capital Market Reform and Access to Global Finance: Making Markets Work," NBER Working Papers 10064, National Bureau of Economic Research, Inc.
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich-to-Poor Capital Flows," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 53-58, May.
  6. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, American Finance Association, vol. 55(2), pages 529-564, 04.
  7. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
    • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  8. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 537-58, June.
  9. Dani Rodrick, 2003. "Growth Strategies," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2003-17, Department of Economics, Johannes Kepler University Linz, Austria.
  10. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 1-16, May.
  11. Andrei Shleifer, 2003. "Will The Sovereign Debt Market Survive?," Harvard Institute of Economic Research Working Papers 2000, Harvard - Institute of Economic Research.
  12. Jeremy Bulow, 2002. "First World Governments and Third World Debt: A Bankruptcy Court for Sovereign Lending?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 229-256.
  13. Henry, Peter B., 2003. "Capital Account Liberalization, The Cost of Capital, and Economic Growth," Research Papers, Stanford University, Graduate School of Business 1778, Stanford University, Graduate School of Business.
  14. Stanley Fischer, 2003. "Globalization and Its Challenges," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 1-30, May.
  15. McMillan, John, 2003. "Market Design: The Policy Uses of Theory," Research Papers, Stanford University, Graduate School of Business 1781, Stanford University, Graduate School of Business.
  16. Anne O. Krueger, 2000. "Conflicting Demands on the International Monetary Fund," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 38-42, May.
  17. George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
  18. Wendy Dobson & Gary Clyde Hufbauer & Hyun Koo Cho, 2001. "World Capital Markets: Challenge to the G-10," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 328, July.
  19. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(1-2), pages 301-334.
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Cited by:
  1. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.

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