Conventional and Insidious Macroeconomic Balance-Sheet Crises

August 22, 2014

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Format: Chicago

Bas B. Bakker, and Leslie Lipschitz. Conventional and Insidious Macroeconomic Balance-Sheet Crises, (USA: International Monetary Fund, 2014) accessed December 4, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper describes the anatomy of two types of balance-sheet macroeconomic crises. Conventional balance-sheet crises are triggered by external imbalances and balance sheet vulnerabilities. They typically occur after capital inflows have led to a substantial build up of foreign currency exposure. Insidious crises are triggered by internal imbalances and balance sheet vulnerabilities. They occur in high-growth economies when an initially equilibrating shift in relative prices and resources and credit in favor of the nontraded sector overshoots equilibrium. The paper argues that policymakers are now better able to forestall conventional crises, but they are much less capable of early detection and avoidance of insidious crises.

Subject: Balance of payments, Capital inflows, Current account deficits, Financial statements, Foreign exchange, National accounts, Public financial management (PFM), Return on investment

Keywords: Asset, Balance sheets, Business cycles, Capital account, Capital flows, Capital inflows, Construction boom, Crises, Current account, Current account deficits, Deficit, Emerging market economy, Exchange rate, Financial statements, Foreign exchange, FX assets, Global, Interest rate, Price, Return on investment, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/160
Stock No:

WPIEA2014160
ISBN:

9781498389044
ISSN:

1018-5941

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