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The Resolution of International Financial Crises: Private Finance and Public Funds


  • Andy Haldane
  • Mark Kruger


Over the past year and a half, the Bank of England and the Bank of Canada have been developing a framework for the resolution of international financial crises that aligns incentives for all parties to deal with a crisis and preserve the integrity of the international financial system. The framework is built on principles, not rules. It attempts to be clear about the respective roles and responsibilities of the public and private sectors. A central element in shaping private sector expectations is knowledge that the official sector will behave predictably. Constraints on lending by the International Monetary Fund are a key step in that direction. They ensure that private sector involvement is a crucial part of crisis resolution, and they help encourage debtors and creditors to seek co-operative solutions to a crisis. Characterized by constraints, clarity, and orderliness, the framework has the potential to reduce the incidence and cost of financial crises.

Suggested Citation

  • Andy Haldane & Mark Kruger, 2001. "The Resolution of International Financial Crises: Private Finance and Public Funds," Staff Working Papers 01-20, Bank of Canada.
  • Handle: RePEc:bca:bocawp:01-20

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    References listed on IDEAS

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    Cited by:

    1. Aitor Erce, 2013. "Sovereign debt crises: could an international court minimize them?," Globalization and Monetary Policy Institute Working Paper 142, Federal Reserve Bank of Dallas.
    2. Jeronimo Zettelmeyer & Jonathan David Ostry & Olivier D Jeanne, 2008. "A Theory of International Crisis Lending and IMF Conditionality," IMF Working Papers 08/236, International Monetary Fund.
    3. Shim, Ilhyock & Sharma, Sunil & Chami, Ralph, 2008. "A Model of the IMF as a Coinsurance Arrangement," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-41.
    4. John Chant & Alexandra Lai & Mark Illing & Fred Daniel, 2003. "Essays on Financial Stability," Technical Reports 95, Bank of Canada.
    5. Brooke, Martin & Pienkowski, Alex & Mendes, Rhys & Santor, Eric, 2013. "Financial Stability Paper No 27: Sovereign Default and State-Contingent Debt," Bank of England Financial Stability Papers 27, Bank of England.
    6. Prasanna Gai & Ashley Taylor, 2004. "International Financial Rescues and Debtor-Country Moral Hazard," International Finance, Wiley Blackwell, vol. 7(3), pages 391-420, December.
    7. Barry Eichengreen, 2003. "Restructuring Sovereign Debt," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 75-98, Fall.
    8. Yilmaz AKYüZ, 2005. "Reforming The Imf: Back To The Drawing Board," G-24 Discussion Papers 38, United Nations Conference on Trade and Development.
    9. Curzio Giannini, 2003. "Verso una procedura fallimentare per il debito sovrano e maggiore disciplina nei finanziamenti del Fondo Monetario Internazionale. Una valutazione di mezza via," Moneta e Credito, Economia civile, vol. 56(222), pages 161-193.
    10. Andrew G Haldane & Gregor Irwin & Victoria Saporta, 2004. "Bail out or work out? theoretical considerations," Economic Journal, Royal Economic Society, vol. 114(494), pages 130-148, March.
    11. Steven B. Kamin, 2002. "Identifying the role of moral hazard in international financial markets," International Finance Discussion Papers 736, Board of Governors of the Federal Reserve System (U.S.).
    12. Randall S. Kroszner, 2003. "Sovereign Debt Restructuring," American Economic Review, American Economic Association, vol. 93(2), pages 75-79, May.
    13. Dungey, M. & Jacobs, J.P.A.M. & Lestano, L., 2010. "The internationalisation of financial crises," Research Report 10002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    14. Benjamin Martin & Adrian Penalver, 2003. "The effect of payments standstills on yields and the maturity structure of international debt," Bank of England working papers 184, Bank of England.
    15. Curzio Giannini, 2003. "Towards a sovereign bankruptcy procedure and greater restraint in IMF crisis lending. An interim assessmen," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 83-112.
    16. Curzio Giannini, 2003. "Towards a sovereign bankruptcy procedure and greater restraint in IMF crisis lending. An interim assessmen," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 83-112.
    17. Aitor Erce-Domínguez, 2006. "Using standstills to manage sovereign debt crises," Working Papers 0636, Banco de España;Working Papers Homepage.
    18. Hal S. Scott, 2002. "How Would a New Bankruptcy Regime Help?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 334-340.
    19. Powell, Andrew & Arozamena, Leandro, 2003. "Liquidity protection versus moral hazard: the role of the IMF," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 1041-1063, December.
    20. Andrew Powell, 2002. "Countries with international payments´ difficulties: what can the IMF do?," Business School Working Papers veintitres, Universidad Torcuato Di Tella.
    21. Philipp Maier, 2007. "Do We Need the IMF to Resolve a Crisis? Lessons from Past Episodes of Debt Restructuring," Staff Working Papers 07-10, Bank of Canada.
    22. Martin Brooke & Rhys R. Mendes & Alex Pienkowski & Eric Santor, 2013. "Sovereign Default and State-Contingent Debt," Discussion Papers 13-3, Bank of Canada.

    More about this item


    International topics;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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