Country Insurance: The Role of Domestic Policies

By Paolo Mauro, Torbjorn I. Becker, Jonathan David Ostry, Romain Ranciere, Olivier D Jeanne

April 10, 2007

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Paolo Mauro, Torbjorn I. Becker, Jonathan David Ostry, Romain Ranciere, and Olivier D Jeanne. Country Insurance: The Role of Domestic Policies, (USA: International Monetary Fund, 2007) accessed November 9, 2024

Summary

This paper focuses on what countries can do on their own—that is, on the role of domestic policies—with respect to country insurance. Member countries are routinely faced with a range of shocks that can contribute to higher volatility in aggregate output and, in extreme cases, to economic crises. The presence of such risks underlies a potential demand for mechanisms to soften the blow from adverse economic shocks. For all countries, the first line of defense against adverse shocks is the pursuit of sound policies. In light of the large costs experienced by emerging markets and developing countries as a result of past debt crises, fiscal policies should seek to improve sustainability, taking into account that sustainable debt levels seem to be lower in emerging and developing countries than in advanced countries. Although much can be accomplished by individual countries through sound policies, risk management, and self-insurance through reserves, collective insurance arrangements are likely to continue playing a key role in cushioning countries from the impact of shocks.

Subject: Balance of payments, Bonds, Central banks, Emerging and frontier financial markets, Financial crises, Financial institutions, Financial markets, Foreign direct investment, Insurance, Reserve positions, Sudden stops

Keywords: Africa, Asia and Pacific, Banking crisis dummy, Bonds, Caribbean, Catastrophe bond, Commodity price futures, Cost, Crisis, Emerging and frontier financial markets, Emerging market country, Foreign direct investment, Global, Insurance, Lending boom date, OP, Output event, Reserve positions, Sudden stops, Terms of trade shock

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Occasional Paper No. 2007/004
Stock No:

S254EA
ISBN:

9781589066076
ISSN:

0251-6365

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