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A (New) Country Insurance Facility

  • Tito Cordella y Eduardo Levy Yeyati

To cope with the self-fulfilling liquidity runs that triggered many recent financial crises, we propose the creation of a country insurance facility. The facility, which we envisage as complementary to the existing multilateral lending facilities, would provide eligible countries with automatic access to a credit line at a predetermined interest rate. Eligibility criteria should be easily verifiable, focus on debt sustainability, and take into account the currency and maturity composition of the debt. Other critical design issues considered here include the size of the facility, its duration and charges, and the exit costs for a country that loses eligibility.

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File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-022005.pdf
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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number newcountryins.

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Length: 34 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:udt:wpbsdt:newcountryins
Contact details of provider: Postal: Miñones 2177 - (1428) Buenos Aires
Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994

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  1. Romaine Ranciere & Aaron Tornell & Frank Westermann, 2003. "Crises and Growth: A Re-Evaluation," NBER Working Papers 10073, National Bureau of Economic Research, Inc.
  2. Charles A. E. Goodhart & Haizhou Huang, 1999. "A model of the lender of last resort," Proceedings, Federal Reserve Bank of San Francisco.
  3. Cordella, Tito & Yeyati, Eduardo Levy, 2003. "Bank bailouts: moral hazard vs. value effect," Journal of Financial Intermediation, Elsevier, vol. 12(4), pages 300-330, October.
  4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  5. Morris Goldstein, 2001. "IMF Structural Conditionality: How Much is Too Much?," Working Paper Series WP01-4, Peterson Institute for International Economics.
  6. Eduardo Borensztein & Paolo Mauro, 2004. "The case for GDP-indexed bonds," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 165-216, 04.
  7. Ethan Kaplan & Dani Rodrik, 2002. "Did the Malaysian Capital Controls Work?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 393-440 National Bureau of Economic Research, Inc.
  8. Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-61, September.
  9. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
  10. Ricardo J. Caballero & Stavros Panageas, 2003. "Hedging Sudden Stops and Precautionary Contractions," NBER Working Papers 9778, National Bureau of Economic Research, Inc.
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