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Dealing with destabilizing 'market discipline'
| Content Provider | Library of Congress - Books/Printed Material |
|---|---|
| Author | Portes, Richard Cohen, Daniel |
| Temporal Coverage | 2004 |
| Copyright Year | 2004 |
| Abstract | "If interest rates (country spreads) rise, debt can rapidly be subject to a snowball effect, which then becomes self-fulfilling with regard to the fundamentals themselves. This is a market imperfection, because we cannot be confident that the unaided market will choose the good equilibrium' over the bad equilibrium'. We see here a fundamental flaw in the process of market discipline. We propose a policy intervention to deal with this structural weakness in the mechanisms of international capital flows. This is based on a simple taxonomy that enables us to break down the origin of crises into three components: a crisis of confidence (spreads and currency crisis), a crisis of fundamentals (real growth rate), and a crisis of economic policy (primary deficit). The policy would seek to short-circuit confidence crises, partly by using IMF support to improve ex ante incentives"--National Bureau of Economic Research web site. |
| Language | English |
| Publisher | National Bureau of Economic Research |
| Publisher Place | Cambridge, MA |
| Part of Series | Catalog |
| Requires | HTML5 supported browser |
| Access Restriction | Open |
| Subject Keyword | Capital Movements External Debts Economic Stabilization Interest Rates |
| Subject Domain (in LCSH) | Interest rates |
| Subject Domain (in LCSH) | Economic stabilization |
| Subject Domain (in LCSH) | Debts, External |
| Subject Domain (in LCSH) | Capital movements |
| Subject Domain (in LCC) | HB1 |
| Content Type | Text |
| Resource Type | Book |
