Contributions

  • Krishnamurthy, Arvind - Contributor
  • Massachusetts Institute of Technology. Dept. of Economics - Contributor

Publication

2001 - Massachusetts Institute of Technology, Dept. of Economics, Cambridge, MA, Massachusetts

Language

English

Word Count

6,000 words, Guess

Page Count

24 pages

Identifiers

Description

Emerging economies are exposed to severe and sudden shortages of international financial resources. Yet domestic agents seem not to undertake enough precautions against these sudden stops. Following our previous work, we highlight in this paper the central role played by limited domestic development in ex-ante (insurance) and ex-post (spot) financial markets in generating this collective undervaluation of external resources and insurance. Within this structure, this paper studies several canonical policies to counteract the external underinsurance. We do this by first solving for the optimal mechanism given the constraints imposed by limited domestic financial development, and then considering the main - in terms of the model and practical relevance - implementations of this mechanism. Keywords: External Shocks, domestic and international collateral, underinsurance, credit lines, liquidity requirements, asset market intervention.

Subjects

Series Statement

  • Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 01-26
  • Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 01-26.

Links

Reader Reviews

No reviews yet for this book.

Be the first to share your thoughts!