The effectiveness of self-protection policies for safeguarding emerging market economies from crises
The recent financial crises in emerging markets have motivated a number of proposed measures that might regulate or provide protection against readily reversible external capital flows. Possible reforms include the adoption of self-protection policies by developing countries that augment traditional macroeconomic and financial sector measures for preventing crises. One set of proposals seek to enhance the liquidity of governments during a crisis, while other proposals seek to reduce exposure to short-term external debt. This paper analyzes some major proposals for self-protection using alternative models of the causes of financial crises in open economies. The effectiveness of liquidity enhancing measures and of capital controls for crisis prevention is shown to depend upon the alleged underlying cause of potential crises. It is also possible that liquidity enhancement could be counterproductive. The economic impact of recent crises on afflicted countries has led some economists to question whether the benefits of capital account liberalization outweigh the costs of exposure to greater volatility in real economic performance. A simple approach for comparing, in simulation, the benefits of capital account openness to the costs of exposure to financial crises is discussed in the first part of the paper.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: Walter-Flex-Straße 3, D - 53113 Bonn|
Web page: http://www.zei.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ilan Goldfajn & Rodrigo O. Valdes, 1997. "Capital Flows and the Twin Crises; The Role of Liquidity," IMF Working Papers 97/87, International Monetary Fund.
- Menzie D. Chinn & Kenneth M. Kletzer, 1999.
"International capital inflows, domestic financial intermediation and financial crises under imperfect information,"
Federal Reserve Bank of San Francisco, issue Sep.
- Menzie D. Chinn & Kenneth M. Kletzer, 2000. "International Capital Inflows, Domestic Financial Intermediation and Financial Crises under Imperfect Information," NBER Working Papers 7902, National Bureau of Economic Research, Inc.
- Manuel Agosin & Ricardo French-Davis, 1997. "Managing capital inflows in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 24(2 Year 19), pages 297-326, December.
- Kenneth M. Kletzer & Brian D. Wright, 2000.
"Sovereign Debt as Intertemporal Barter,"
- Kenneth M. Kletzer and Brian D. Wright., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research (CIDER) Working Papers C98-100, University of California at Berkeley.
- Kletzer, Kenneth M. & Wright, Brian D., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research, Working Paper Series qt4qg3c42v, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Montiel, Peter & Reinhart, Carmen M., 1999.
"Do capital controls and macroeconomic policies influence the volume and composition of capital flows? Evidence from the 1990s,"
Journal of International Money and Finance,
Elsevier, vol. 18(4), pages 619-635, August.
- Reinhart, Carmen & Montiel, Peter, 1999. "Do capital controls influence the volume and composition of capital flows? Evidence from the 1990s," MPRA Paper 13710, University Library of Munich, Germany.
- Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
- Kenneth Kletzer & Mark Spiegel, 1996. "Speculative capital inflows and exchange rate targeting in the Pacific Basin," Pacific Basin Working Paper Series 96-05, Federal Reserve Bank of San Francisco.
- Reinhart, Carmen & Khan, Mohsin, 1995.
"Capital Flows in the APEC Region,"
8200, University Library of Munich, Germany.
- Reinhart, Carmen & Khan, Mohsin, 1995. "Macroeconomic Management in APEC Economies: The Response to Capital Inflows," MPRA Paper 8148, University Library of Munich, Germany.
- Carmen Reinhart & Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 122, International Monetary Fund.
- Martin Feldstein, 1999. "Self-Protection for Emerging Market Economies," NBER Working Papers 6907, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:zbw:zeiwps:b082000. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.