Cover IMF Staff Position Notes
Coping with the Crisis: Policy Options for Emerging Market Countries
Author: Mr. Christopher W. Crowe, Mr. Jonathan David Ostry, Mr. Jun I Kim, Mr. Marcos d Chamon, and Mr. Atish R. Ghosh
Series:
IMF Staff Position Notes
Volume/Issue:
Volume 2009: Issue 008
Language:
English
Publication Date:
23 Apr 2009
DOI:
https://doi.org/10.5089/9781462323296.004
ISBN:
9781462323296
ISSN:
2617-6742
Pages:
29
Keywords:
SPN; foreign currency; capital account; emerging market country; output gap; hard-won gain; adverse selection; Exchange rates; Currencies; Financial statements; Global; East Asia
Legal-disclaimer:
The views expressed herein are those of the author(s) and should not be attributed to the IMF, its Executive Board, or its management.
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This chapter outlines policies to help solve the debt overhang and bring about recovery in both groups of countries. The current financial turmoil is confronting emerging market economies with two shocks: a ‘sudden stop’ of capital inflows resulting from the global deleveraging process, and a collapse in export demand associated with the global slump. A key ingredient appears to be greater official financing to expand the ‘policy space’ available to emerging market economies (EME) to pursue supportive macroeconomic policies—including, in countries with large debt overhangs, by helping to meet the fiscal outlays associated with the resolution of that overhang. An important first step is to ensure an adequate framework to facilitate rapid debt workouts. Debt restructuring mechanisms can provide greater scope for monetary easing by reducing the negative repercussions of exchange rate depreciation on unhedged balance sheets. Depending on the available fiscal space, expansionary fiscal policy should also be deployed to support economic activity.
Cover IMF Staff Position Notes
IMF Staff Position Notes
ISSN:
2617-6742
Publisher:
International Monetary Fund