Implications for the Adjustment Process of International Asset Risks: Exchange Controls, Intervention and Policy Risk, and Sovereign Risk
This paper analyzes the implications of international asset risks for the operation of the international adjustment process, with special emphasis on the scope for monetary policy. After a brief review of actual practice in the evaluation of country risk, the paper discusses a number of modifications in the standard theory of efficient international financial markets that are necessitated by the existence of country risk., For macroeconomic policy, the major implications are that domestic and foreign assets become imperfect substitutes and that world demand for domestic assets is likely to be less than perfectly elastic, even in the "small country" case, Even under a fixed exchange rate, a measure of domestic control over domestic interest rates therefore exists.
|Date of creation:||Jul 1980|
|Publication status:||published as Buiter, W.H. "Implications for the Adjustment Process of International Asset Risk: Exchange Controls, Intervention and Policy Risk, and Sovereign Risk ." Internationalization of Financial Markets & National Economic Policy, ed . by R.G. Hawkinsm R.M. Levich & C.G. Wihlberg, JAI Press, 1983, pp. 69-102|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Hellwig, Martin F, 1977. "A Model of Borrowing and Lending with Bankruptcy," Econometrica, Econometric Society, vol. 45(8), pages 1879-1906, November.
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- Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
- Frank, Charles Jr. & Cline, William R., 1971. "Measurement of debt servicing capacity: An application of discriminant analysis," Journal of International Economics, Elsevier, vol. 1(3), pages 327-344, August.
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