Working Paper: NBER ID: w17361
Authors: Bergljot Barkbu; Barry Eichengreen; Ashoka Mody
Abstract: We review the modern history of financial crises, providing a context for analyses of the world's recent bout of financial instability. Along with indicators of economic performance in the subject countries, we present a comprehensive description of multilateral rescue efforts spanning the last 30 years. We show that while emergency lending has grown, reliance on debt restructuring has declined. This leads us to ask what can be done to rebalance the management of debt problems toward a better mix of emergency lending and private sector burden sharing. Building on the literature on collective action clauses, we explore the idea of sovereign cocos, contingent debt securities that automatically reduce payment obligations in the event of debt-sustainability problems.
Keywords: financial crises; multilateral response; IMF; sovereign debt; emergency lending
JEL Codes: F0; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in emergency lending by the IMF (F33) | decrease in debt restructuring efforts (G33) |
| severity of crises (H12) | size of IMF financing packages (F33) |
| availability of official financing (G32) | disincentive for timely economic adjustments (E65) |