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Under What Circumstances, Past and Present, Have International Rescues of Countries in Financial Distress Been Successful?

  • Michael D. Bordo
  • Anna J. Schwartz

Recent events in Asia and other parts of the globe have prompted calls from many quarters for international rescue of the monetary or fiscal authorities of distressed countries. We contrast the experience before 1973 of rescues of monetary authorities of advanced countries temporarily short of liquidity with recent experience of bailouts. International rescues in the past involved relatively small amounts of money, sufficient to stave off devaluation or abandonment of a fixed exchange rate, while remedial policies were put in place. Recent bailouts involve handing over relatively large amounts to both foreign lenders and domestic investors after devaluation of a pegged exchange rate to avoid their incurring wealth losses. We document past rescues, whether successful or unsuccessful, by monetary regimes different today from past experience.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6824.

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Date of creation: Dec 1998
Date of revision:
Publication status: published as Bordo, Michael D. and Anna J. Schwartz. "Under What Circumstances, Past And Present, Have International Rescues Of Countries In Financial Distress Been Successful?," Journal of International Money and Finance, 1999, v18(4,Aug), 683-708.
Handle: RePEc:nbr:nberwo:6824
Note: IFM ME
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  1. Marc Flandreau, 1997. "Central Bank Cooperation in Historical Perspective: A Sceptical View," Economic History Review, Economic History Society, vol. 50(4), pages 735-763, November.
  2. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
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  5. Schwartz, Anna J, 1997. "From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 135-53, May.
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  9. Michael D. Bordo, 1992. "The Bretton Woods International Monetary System: An Historical Overview," NBER Working Papers 4033, National Bureau of Economic Research, Inc.
  10. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
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