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Managing Macroeconomic Crises

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Author Info
Jeffrey A. Frankel
Shang-Jin Wei

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Abstract

This study reviews broadly the experience of the last decade on crisis prevention and management. It seeks to draw greater attention to policy decisions that are made during the phase when capital inflows come to a sudden stop. Procrastination---the period of financing a balance of payments deficit rather than adjusting---had serious consequences in some cases. Crises are more frequent and more severe when short-term borrowing and dollar denomination external debt are high, and foreign direct investment (FDI) and reserves are low, in large part because balance sheets are then very sensitive to increases in exchange rates and short-term interest rates. If countries that are faced with a fall in inflows adjusted more promptly, rather than stalling for time by running down reserves or shifting to loans that are shorter-termed and dollar-denominated, they might be able to adjust on more attractive terms.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10907.

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Date of creation: Nov 2004
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Handle: RePEc:nbr:nberwo:10907

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F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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  1. Joshua Aizenman & Brian Pinto & Artur Radziwill, 2004. "Sources for Financing Domestic Capital -- Is Foreign Saving a Viable Option for Developing Countries?," NBER Working Papers 10624, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Assaf Razin & Yona Rubinstein, 2005. "Evaluation of Exchange-Rate, Capital-Market, and Dollarization Regimes in the Presence of Sudden Stops," Working Papers 042005, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
  3. Ronald U. Mendoza, 2007. "A Compendium of Policy Instruments to Enhance Financial Stability and Debt Management in Emerging Market Economies," Working Papers 48, United Nations, Department of Economics and Social Affairs. [Downloadable!]
  4. Raghuram G. Rajan & Ioannis Tokatlidis, 2005. "Dollar Shortages and Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September. [Downloadable!]
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  5. Frankel, Jeffrey, 2005. "Contractionary Currency Crashes In Developing Countries," Working Paper Series rwp05-017, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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  6. Andrew K. Rose, 2006. "A Stable International Monetary System Emerges: Inflation Targeting is Bretton Woods, Reversed," NBER Working Papers 12711, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Monica Baumgarten de Bolle & Ivetta Hakobyan & Bjoern Rother, 2006. "The Level and Composition of Public Sector Debt in Emerging Market Crises," IMF Working Papers 06/186, International Monetary Fund. [Downloadable!]
  8. Barry Eichengreen & Poonam Gupta & Ashoka Mody, 2006. "Sudden Stops and IMF-Supported Programs," NBER Working Papers 12235, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Assaf Razin & Yona Rubinstein, 2005. "Evaluation of Currency Regimes: The Unique Role of Sudden Stops," NBER Working Papers 11785, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2005. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Working Papers 11696, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Rose, Andrew K, 2006. "A Stable International Monetary System Emerges: Bretton Woods, Reversed," CEPR Discussion Papers 5854, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Gill, Indermit & Pinto, Brian, 2005. "Public debt in developing countries : has the market-based model worked?," Policy Research Working Paper Series 3674, The World Bank. [Downloadable!]
  13. Márcio Holland, 2006. "Exchange Rate Volatility and the Fear of Floating in Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 7(2), pages 279-292. [Downloadable!]
  14. Budina, Nina & van Wijnbergen, Sweder, 2007. "Quantitative approaches to fiscal sustainability analysis : a new World Bank tool applied to Turkey," Policy Research Working Paper Series 4169, The World Bank. [Downloadable!]
  15. Joël van der Weele, 2005. "Financing development: debt versus equity," DNB Working Papers 038, Netherlands Central Bank, Research Department. [Downloadable!]
  16. Márcio Holland, 2006. "Is The Debt Intolerance Approach Right? Empirical Evidence From Panel Data Analysis," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 59, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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