Hidden Bibliographic Details
| Other authors / contributors: | Portes, Richard, author.
International Monetary Fund. Research Department.
|
|---|
| ISBN: | 1283511312
9781283511315
9781451908626
1451908628
|
|---|
| Notes: | Includes bibliographical references.
Restrictions unspecified
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2010.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
digitized 2010 HathiTrust Digital Library committed to preserve
Print version record.
|
|---|
| Summary: | If interest rates (country spreads) rise, debt can rapidly be subject to a snowball effect, which becomes self-fulfilling with regard to the fundamentals themselves. This is a market imperfection, because we cannot be confident that the unaided market will choose the "good" over the "bad" equilibrium. We propose a policy intervention to deal with this structural weakness in the mechanisms of international capital flows. This is based on a simple taxonomy that breaks down the origin of crises into three components: confidence (spreads and currency crisis), fundamentals (real growth rate), and economic policy (primary deficit). Theory then suggests a set of circumstances in which a lender of first resort would be desirable. The policy would seek to short-circuit confidence crises, partly by using IMF support to improve ex ante incentives. Theory also illuminates the potential role of collective action clauses in reducing the risk of self-fulfilling debt crises.
|
|---|
| Other form: | Print version: Cohen, Daniel, 1953- Toward a lender of first resort. [Washington, D.C.] : International Monetary Fund, Research Dept., ©2006
|
|---|
| Standard no.: | 10.5089/9781451908626.001
|
|---|
