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

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  • Ramkishen S. Rajan

    (SCAPE)

Abstract

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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  • Ramkishen S. Rajan, 2005. "Managing New-Style Currency Crises : The Swan Diagram Approach Revisited," Macroeconomics Working Papers 22574, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:macroe:22574
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    1. Ramkishen S. Rajan, 2006. "Monetary and Financial Cooperation in Asia : Emerging Trends and Prospects," Finance Working Papers 22125, East Asian Bureau of Economic Research.

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    More about this item

    Keywords

    Adjustment; Expenditure Reducing; Expenditure Switching; Financing; Internal balance; External balance;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G01 - Financial Economics - - General - - - Financial Crises

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