IMF Working Papers

Emerging Markets Crisis: An Asset Markets Perspective

By Arvind Krishnamurthy, Ricardo J. Caballero

September 1, 1999

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Arvind Krishnamurthy, and Ricardo J. Caballero Emerging Markets Crisis: An Asset Markets Perspective, (USA: International Monetary Fund, 1999) accessed November 21, 2024
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

The entire difference between a mild downturn and a devastating crisis is the occurrence of sharp fire sales of domestic assets and possibly foreign exchange and the ensuing collapse in the balance sheets of both the financial and nonfinancial sector. Why and how do such crises materialize? And why doesn’t the private sector take appropriate precautions to avoid the consequences of crises? In this paper we argue that the combination of weak international financial links and underdeveloped domestic financial markets offers a parsimonious account of these and related phenomena present in emerging markets.

Subject: Asset and liability management, Asset liquidity, Asset prices, Banking, Collateral, Commercial banks, Financial institutions, Financial statements, Prices, Public financial management (PFM)

Keywords: Asset liquidity, Asset prices, Balance sheets, Banks, Capital flows, Clearing condition, Collateral, Collateral constraint, Collateral underprovision, Commercial banks, Contractual and corporate governance problems, Distressed firm, Domestic and foreign spreads, East Asia, Excessive leverage, Financial constraints, Financial statements, Fire sales, Interest rate, International collateral, Market clearing, Mis-valuation of collateral, Real depreciation, Wasted collateral, WP

Publication Details

  • Pages:

    53

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1999/129

  • Stock No:

    WPIEA1291999

  • ISBN:

    9781451855098

  • ISSN:

    1018-5941

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