Working Paper: NBER ID: w8634
Authors: Jeffrey A. Frankel; Nouriel Roubini
Abstract: This paper considers policies of the industrialized countries, as they pertain to crises in emerging markets. These fall into three areas: (1) their own macroeconomic policies, which determine the global financial environment; (2) their role in responding to crises when they occur, particularly through rescue packages, which have three components -- reforms in debtor countries, public funds from creditor countries, and private sector involvement; and (3) efforts to reform the international financial architecture, with the aim of lessening the frequency and severity of future crises. A recurrent theme is the tension between mitigating crises that occur, and the moral hazard that such efforts create in the longer term. In addition to reviewing these three areas of policy, we consider the institutions through which the more powerful countries exercise their influence. We conclude with a discussion of the debate over the sins of the International Monetary Fund, and proposals for reform.
Keywords: No keywords provided
JEL Codes: F3; F33; F34; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tighter monetary policy in the US (E52) | Increased borrowing costs and financial instability in emerging markets (F65) |
| Global easing of monetary policy (E52) | Recovery in emerging markets (O54) |
| Increase in G7 growth by one percentage point (F62) | Increase in growth rate among market borrowers by 0.78 percentage points (E43) |
| Crisis mitigation efforts (H12) | Riskier capital flows in the future (F65) |