IMF-Supported Programs : Recent Staff Research

Book
Chapter

CHAPTER 8 Different Strokes? Common and Uncommon Responses to Financial Crises

Author(s):
Alessandro Rebucci, and Ashoka Mody
Published Date:
April 2006
    • ShareShare
    Author(s)
    James M. Boughton

    Much of the debate on the management of financial crises has focused on structural and psychological issues related to 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.

    You are not logged in and do not have access to this content. Please login or, to subscribe to IMF eLibrary, please click here