Different Strokes? Common and Uncommon Responses to Financial Crises

Author/Editor:

James M. Boughton

Publication Date:

January 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Much of the debate about the management of financial crises has focused on structural and psychological issues regarding the conditions that are supposed to be necessary to restore investor confidence. Nonetheless, the paramount requirement in the short term is for countries in crisis to adopt correct macroeconomic policies. An analysis of conventional macroeconomic models reveals that countries can afford to run expansionary policies to restore internal balance only if they can afford to ignore the requirements for external balance. This arithmetic does not depend on whether macroeconomic policies were inappropriate before the crisis hit.

Series:

Working Paper No. 2001/012

Subject:

Balance of payments Capital flows Capital inflows Capital outflows Financial crises Fiscal policy

English

Publication Date:

January 1, 2001

ISBN/ISSN:

9781451842906/1018-5941

Stock No:

WPIEA0122001

Pages:

19

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