Coping with the Crisis: Policy Options for Emerging Market Countries
IMF Staff Position Notes, April 23, 2009
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- Coping with the Crisis: Policy Options for Emerging Market Countries
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Bibliographic details
- Authors: Christopher W. Crowe, Jonathan David Ostry, Jun I Kim, Marcos Chamon, Atish R. Ghosh
- Published: April 23, 2009
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781462323296.004
Overview and context
- Authors: Christopher W. Crowe, Jonathan David Ostry, Jun I Kim, Marcos Chamon, Atish R. Ghosh
- Publication date: April 23, 2009
- Core problem: Emerging market economies (EME) face two concurrent shocks:
- a ‘sudden stop’ of capital inflows resulting from the global deleveraging process
- a collapse in export demand associated with the global slump
- Objective: Outline policies to solve the debt overhang and bring about recovery across groups of emerging market countries.
Key findings and mechanisms
- Greater official financing is a key ingredient to expand the “policy space” available to EMEs to pursue supportive macroeconomic policies.
- In countries with large debt overhangs, official financing can help meet the fiscal outlays associated with resolving that overhang.
- Ensuring an adequate framework to facilitate rapid debt workouts is an important first step.
- Debt restructuring mechanisms can:
- provide greater scope for monetary easing
- reduce negative repercussions of exchange rate depreciation on unhedged balance sheets
- Depending on available fiscal space, expansionary fiscal policy should be deployed to support economic activity.
Policy recommendations
- Expand official financing to EMEs to increase policy space for supportive macroeconomic action.
- Establish and ensure adequate frameworks for rapid debt workouts and debt restructuring mechanisms.
- Use debt restructuring to enable more monetary easing without transferring undue balance-sheet risks to the non-financial sector.
- Deploy expansionary fiscal policy where fiscal space permits to support domestic demand and recovery.
Subjects and keywords (as listed)
- Subjects: Banking, Currencies, Exchange rates, Financial statements, Fiscal policy, Foreign exchange, Money, Public financial management (PFM)
- Keywords: adverse selection, capital account, Currencies, East Asia, emerging market country, Exchange rates, Financial statements, foreign currency, Global, hard-won gain, output gap, SPN
Content in this bundle
- _spn0908 - Executive Summary