Chapter 8 Different Strokes? Common and Uncommon Responses to Financial Crises
Author:
James M. Boughton
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Language:
English
Print Publication Date:
03 Apr 2006
Keywords:
SEM; IMF program; country; IMF-supported program; program implementation; IMF effort; current account ratio; Current account; Capital flows; Private capital flows; Fiscal stance; Global; Sub-Saharan Africa; East Asia; Africa; Europe; adjustment program; IMF response; expansionary monetary policy; han dling; external shock; Capital inflows; Capital outflows; Exchange rates

Abstract

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.

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ISBN:
9781589063617
Publication Date:
03 Apr 2006
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781589063617.072
Pages:
292

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