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A Balance Sheet Approach to Financial Crisis

Author

Listed:
  • Mr. Brad Setser
  • Nouriel Roubini
  • Mr. Christian Keller
  • Mr. Mark Allen
  • Mr. Christoph B. Rosenberg

Abstract

The paper lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in the aggregate balance sheet of a country and the balance sheets of its main sectors (assets and liabilities). It focuses on the risks created by maturity, currency, and capital structure mismatches. This framework draws attention to the vulnerabilities created by debts among residents, particularly those denominated in foreign currency, and it helps to explain how problems in one sector can spill over into other sectors, eventually triggering an external balance of payments crisis. The paper also discusses the potential of macroeconomic policies and official intervention to mitigate the cost of such a crisis.

Suggested Citation

  • Mr. Brad Setser & Nouriel Roubini & Mr. Christian Keller & Mr. Mark Allen & Mr. Christoph B. Rosenberg, 2002. "A Balance Sheet Approach to Financial Crisis," IMF Working Papers 2002/210, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/210
    as

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    References listed on IDEAS

    as
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