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Managing New-Style Currency Crises : The Swan Diagram Approach Revisited

  • Ramkishen S. Rajan

    (SCAPE)

The new-style currency crises that have inflicted a number of developing and emerging economies of late are characterized by sudden stops in capital inflows and adverse balance sheet effects. Given the potential high costs of these crises, there remains an ongoing debate on how they might best be managed when they do arise. This paper argues that the age-old Swan diagram, appropriately modified, is able to provide useful insights into how a country might manage a new-style crisis via a combination of adjustment (which involves expenditure switching and reducing polices) and financing.

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Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22574.

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Date of creation: Jan 2005
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Handle: RePEc:eab:macroe:22574
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