{
  "title": "A Balance Sheet Approach to Financial Crisis",
  "publication": "IMF Working Papers, December 1, 2002",
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  "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).",
  "sections": [
    {
      "heading": "Analytical framework",
      "content": "- Lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in:\n  - the aggregate balance sheet of a country, and\n  - the balance sheets of its main sectors (assets and liabilities).\n- Focuses on risks created by:\n  - maturity mismatches,\n  - currency mismatches, and\n  - capital structure mismatches.\n- Draws attention to vulnerabilities created by debts among residents, particularly debts denominated in foreign currency.\n- Explains transmission: problems in one sector can spill over into other sectors and eventually trigger an external balance of payments crisis."
    },
    {
      "heading": "Key findings and thematic emphases",
      "content": "- Emphasizes the importance of analyzing stock (balance sheet) variables rather than only flow measures for crisis diagnosis.\n- Identifies specific sources of vulnerability:\n  - currency-denominated debt held by residents,\n  - maturity mismatches (short-term liabilities versus longer-term assets),\n  - unfavorable capital structure (e.g., reliance on short-term or foreign-currency funding).\n- Highlights cross-sector spillovers as a mechanism by which sectoral problems escalate into broader external crises."
    },
    {
      "heading": "Policy analysis and recommendations",
      "content": "- Discusses the potential of macroeconomic policies to mitigate the cost of a balance-sheet-driven crisis.\n- Considers the role of official intervention in crisis mitigation and cost reduction.\n- Implicit policy priorities based on the framework:\n  - monitor and manage currency and maturity mismatches across sectors;\n  - address resident foreign-currency indebtedness vulnerabilities;\n  - strengthen balance-sheet resilience to limit spillovers across sectors.\n\n---\n\n Content in this bundle\n\n- Annex I\n  - Annex I (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Annex I (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/a-balance-sheet-approach-to-financial-crisis-16167"
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    "[Markdown version](/en/publications/wp/issues/2016/12/30/a-balance-sheet-approach-to-financial-crisis-16167/index.md)",
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    "Authors: Brad Setser, Nouriel Roubini, Christian Keller, Mark Allen, Christoph B. Rosenberg",
    "Published: December 1, 2002",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451957150.001",
    "Lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in:",
    "Focuses on risks created by:",
    "Draws attention to vulnerabilities created by debts among residents, particularly debts denominated in foreign currency.",
    "Explains transmission: problems in one sector can spill over into other sectors and eventually trigger an external balance of payments crisis.",
    "Emphasizes the importance of analyzing stock (balance sheet) variables rather than only flow measures for crisis diagnosis.",
    "Identifies specific sources of vulnerability:",
    "Highlights cross-sector spillovers as a mechanism by which sectoral problems escalate into broader external crises.",
    "Discusses the potential of macroeconomic policies to mitigate the cost of a balance-sheet-driven crisis.",
    "Considers the role of official intervention in crisis mitigation and cost reduction.",
    "Implicit policy priorities based on the framework:",
    "**Annex I**"
  ],
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