In standard models of the balance of payments, crises occur when investors begin to doubt the credibility of the government's commitment to its exchange rate policy. In this paper, we develop an alternative model in which balance of payments crises occur even if the credibility of government fiscal, monetary, and exchange rate policies is never in doubt. In this alternative model, international lending is constrained by the risk of repudiation. Balance of payments crises occur when the government and citizens of a country hit their international borrowing constraints. Our model is broadly consistent with events in Mexico from 1987-1995. More generally, our model suggests that countries which undertake sweeping macroeconomic and structural reforms should expect to face a balance of payments crisis when they exhaust their access to international capital inflows.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5329.
Length: Date of creation: Oct 1995 Date of revision: Handle: RePEc:nbr:nberwo:5329
Note: IFM Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Eaton, Jonathan & Fernandez, Raquel, 1995.
"Sovereign debt,"
Handbook of International Economics,
in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077
Elsevier.
[Downloadable!] (restricted)
Other versions:
Eaton, J. & Fernandez, R., 1995.
"Sovereign Debt,"
Papers
37, Boston University - Department of Economics.
Jonathan Eaton & Raquel Fernandez, 1995.
"Sovereign Debt,"
NBER Working Papers
5131, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
V.V. Chari & Patrick J. Kehoe, 2003.
"Hot money,"
Staff Report
228, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Other versions:
V. V. Chari & Patrick Kehoe, 1997.
"Hot Money,"
NBER Working Papers
6007, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
V. V. Chari & Patrick J. Kehoe, 2003.
"Hot Money,"
Levine's Bibliography
506439000000000415, UCLA Department of Economics.
[Downloadable!]
V. V. Chari & Patrick J. Kehoe, 2003.
"Hot Money,"
Journal of Political Economy,
University of Chicago Press, vol. 111(6), pages 1262-1292, December.
[Downloadable!] (restricted)
Sebastian Edwards, 2002.
"Does the Current Account Matter?,"
NBER Chapters,
in: Preventing Currency Crises in Emerging Markets, pages 21-76
National Bureau of Economic Research, Inc.
[Downloadable!]