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A Balance Sheet Approach to Financial Crisis

Author/Editor: Allen, Mark | Rosenberg, Christoph B. | Keller, Christian | Setser, Brad | Roubini, Nouriel
Authorized for Distribution: December 1, 2002
Electronic Access: Free Full Text (PDF file size is 424KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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.
 
Series: Working Paper No. 02/210
Subject(s): Financial crisis | Emerging markets | External financing
Author's keyword(s): National balance sheets | financial crisis | IMF policy | emerging markets
Notes: See also: The Balance Sheet Approach and its Applications at the Fund, June 30, 2003
 
English  
    Published:   December 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2102002   Pages:   63
    Price:   US$15.00
       
     
Please address any questions about this title to publications@imf.org.