Ms. Catherine A Pattillo, Mr. Andrew Berg, Mr. Gian M Milesi-Ferretti, and Mr. Eduardo Borensztein
Recent years have witnessed an increase in the frequency of currency and balance of payments crises in developing countries. More important, the crises have become more virulent, have caused widespread disruption to other developing countries, and have even had repercussions on advanced economies. To predict crises, their causes must be clearly understood. Two competing strands of theories are reviewed in this paper. The first focuses on the consequences of such policies as excessive credit growth in provoking depletion of foreign exchange reserves and making a devaluation enevitable. The second emphasizes the trade-offs between internal and external balance that the policymaker faces in defending a peg.
This book, edited by Paul Streeten, examines the ends and means of adjustment, aspects of trade policy, and lessons from the experience of South and East Asia, as well as comparing the debt situations of Asian and Latin American countries.