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A Balance Sheet Approach to Financial Crisis
Author:
Mr. Brad Setser null

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,
Nouriel Roubini null

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Mr. Christian Keller
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Mr. Mark Allen
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Mr. Christoph B. Rosenberg
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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 210
Language:
English
Publication Date:
01 Dec 2002
DOI:
https://doi.org/10.5089/9781451957150.001
ISBN:
9781451957150
ISSN:
1018-5941
Pages:
63
Keywords:
WP; foreign currency; hard currency; short-term debt; debt restructuring; interest rate; National balance sheets; financial crisis; IMF policy; emerging markets; capital structure; preferred debt; currency risk; rollover crisis; nominal exchange rate; Financial statements; Currencies; Exchange rates; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in the aggregate balance sheet of a country and the balance sheets of its main sectors (assets and liabilities). It focuses on the risks created by maturity, currency, and capital structure mismatches. This framework draws attention to the vulnerabilities created by debts among residents, particularly those denominated in foreign currency, and it helps to explain how problems in one sector can spill over into other sectors, eventually triggering an external balance of payments crisis. The paper also discusses the potential of macroeconomic policies and official intervention to mitigate the cost of such a crisis.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund