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

  • Ramkishen S. Rajan

    ()

    (School of Public Policy, George Mason University)

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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File URL: http://www.fas.nus.edu.sg/ecs/pub/wp-scape/0517.pdf
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Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0517.

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Date of creation: Jan 2006
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Handle: RePEc:sca:scaewp:0517
Contact details of provider: Web page: http://www.fas.nus.edu.sg/ecs/scape/index.html

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