A Balance Sheet Approach to Financial Crisis
International Monetary Fund, Dec 1, 2002 - Business & Economics - 63 pages
The paper lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in the aggregate balance sheet of a country and the balance sheets of its main sectors (assets and liabilities). It focuses on the risks created by maturity, currency, and capital structure mismatches. This framework draws attention to the vulnerabilities created by debts among residents, particularly those denominated in foreign currency, and it helps to explain how problems in one sector can spill over into other sectors, eventually triggering an external balance of payments crisis. The paper also discusses the potential of macroeconomic policies and official intervention to mitigate the cost of such a crisis.
What people are saying - Write a review
We haven't found any reviews in the usual places.
II The Anatomy of Balance Sheet Crises
III Implications for Crisis Prevention and Fund Policy Advice During Crises
IV The Role of Official External Financing
Other editions - View all
aggregate balance sheet assess assets and liabilities balance of payments balance sheet analysis balance sheet approach balance sheet problems banking system billion borrowing capital account crises capital structure central bank claims commercial banks country’s creditors currency denominated debt currency in domestic currency mismatches currency risk current account debt restructuring demand for foreign deposits difficulties equity example exchange rate regime extemal external debt external financing external official financial crises financial sector financing gap financing needs fiscal ﬂows foreign assets foreign currency debt foreign currency denominated foreign currency liquidity foreign exchange Fund Fund’s govemment Government sector government’s hard currency hedge increase interest rates International Investment Position investors macroeconomic maturity and currency maturity mismatch medium & long monetary authorities nonbank sector official financing official lending official sector real depreciation reserves residents sectoral balance sheets shock short-term debt short-term liabilities solvency risk term in foreign Thailand trigger U.S. dollars