IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Dollar Shortages and Crises

  • Raghuram G. Rajan

    (International Monetary Fund)

  • Ioannis Tokatlidis

    (International Monetary Fund)

Emerging markets do not handle adverse shocks well. In this paper, we lay out an argument about why emerging markets are so fragile, and why they may adopt contractual mechanisms—such as a dollarized banking system—that increase their fragility. We draw on this analysis to explain why dollarized economies may be prone to dollar shortages and twin crises. The model of crises described here differs in some important aspects from what are now termed the first-, second-, and third-generation models of crises. We then examine how domestic policies, especially monetary policy, can mitigate the adverse effects of these crises. Finally, we consider the role, potentially constructive, that international financial institutions may undertake both in helping to prevent the crises and in helping to resolve them.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL: http://www.ijcb.org/journal/ijcb05q3a5.htm
Download Restriction: no

File URL: http://www.ijcb.org/journal/ijcb05q3a5.pdf
Download Restriction: no

Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 1 (2005)
Issue (Month): 2 (September)
Pages:

as
in new window

Handle: RePEc:ijc:ijcjou:y:2005:q:3:a:5
Contact details of provider: Web page: http://www.ijcb.org/

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.:

as in new window
  1. Douglas W. Diamond & Raghuram G. Rajan, 2003. "Liquidity Shortages and Banking Crises," NBER Working Papers 10071, National Bureau of Economic Research, Inc.
  2. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1999. "Prospective deficits and the asian currency crisis," Policy Research Working Paper Series 2174, The World Bank.
  3. repec:rus:hseeco:72137 is not listed on IDEAS
  4. Rodrik, Dani, 1998. "Where Did all the Growth Go? External Shocks, Social Conflict and Growth Collapses," CEPR Discussion Papers 1789, C.E.P.R. Discussion Papers.
  5. Reinhart, Carmen, 2004. "Debt intolerance: Executive summary," MPRA Paper 13398, University Library of Munich, Germany.
  6. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
  7. Caballero, Ricardo & Krishnamurthy, Arvind, 2005. "Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective," MPRA Paper 824, University Library of Munich, Germany.
  8. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
  9. Philip R. Lane & Aaron Tornell, 1998. "Why Aren't Savings Rates in Latin America Procyclical?," NBER Working Papers 6502, National Bureau of Economic Research, Inc.
  10. repec:imf:imfwpa:03/146 is not listed on IDEAS
  11. Douglas W. Diamond & Raghuram G. Rajan, 1999. "Liquidity Risk, Liquidity Creation and Financial Fragility: A Theory of Banking," NBER Working Papers 7430, National Bureau of Economic Research, Inc.
  12. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  13. Ricardo J. Caballero & Arvind Krishnamurthy, 2003. "Excessive Dollar Debt: Financial Development and Underinsurance," Journal of Finance, American Finance Association, vol. 58(2), pages 867-894, 04.
  14. Ricardo J. Caballero & Arvind Krishnamurthy, 2000. "International Liquidity Management: Sterilization Policy in Illiquid Financial Markets," NBER Working Papers 7740, National Bureau of Economic Research, Inc.
  15. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
  16. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2000. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Working Papers 00.07, Swiss National Bank, Study Center Gerzensee.
  17. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  18. De Nicolo, Gianni & Honohan, Patrick & Ize, Alain, 2003. "Dollarization of the banking system : good or bad?," Policy Research Working Paper Series 3116, The World Bank.
  19. Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2004. "On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects," IDB Publications (Working Papers) 6516, Inter-American Development Bank.
  20. Edward L. Glaeser & Andrei Shleifer, 2001. "A Case for Quantity Regulation," NBER Working Papers 8184, National Bureau of Economic Research, Inc.
  21. Leslie Teo & Charles Enoch & Carl-Johan Lindgren & Tomás J. T. Baliño & Anne Marie Gulde & Marc Quintyn, 2000. "Financial Sector Crisis and Restructuring; Lessons from Asia: Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund.
  22. Hoyt Bleakley & Kevin Cowan, 2008. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 612-626, November.
  23. Adam Bennett & Eduardo Borensztein & Tomás J. T. Baliño, 1999. "Monetary Policy in Dollarized Economies," IMF Occasional Papers 171, International Monetary Fund.
  24. repec:rus:hseeco:123922 is not listed on IDEAS
  25. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
  26. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
  27. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  28. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
  29. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications, The World Bank, number 13938.
  30. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
  31. repec:imf:imfwpa:04/192 is not listed on IDEAS
  32. repec:imf:imfwpa:04/215 is not listed on IDEAS
  33. repec:imf:imfwpa:04/177 is not listed on IDEAS
  34. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
  35. repec:imf:imfwpa:96/4 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2005:q:3:a:5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.