Hedging sudden stops & precautionary recessions
a quantitative framework
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Author
Contributions
- Panageas, Stavros - Contributor
- Massachusetts Institute of Technology. Dept. of Economics - Contributor
Publication
2003 - Massachusetts Institute of Technology, Dept. of Economics, Cambridge, MA, Massachusetts
Language
English
Word Count
13,000 words, Guess
Page Count
52 pages
Identifiers
- Internet Archivehedgingsuddensto00caba
- OCLC Control Number53191268
- Open LibraryOL24639966M
Description
Even well managed emerging market economies are exposed to significant external risk, the bulk of which is financial. At a moment's notice, these economies may be required to reverse the capital inflows that have supported the preceding boom. Even if such a reversal does not take place, its anticipation often leads to costly precautionary measures and recessions. In this paper, we characterize the business cycle of an economy that on average needs to borrow but faces stochastic financial constraints. We focus on the optimal financial policy of such an economy under different imperfections and degrees of crowding out in its hedging opportunities. The model is simple enough to be analytically tractable but flexible and realistic enough to provide quantitative guidance. Keywords: Capital Flows, Sudden Stops, Financial Constraints, Recessions, Hedging, Insurance, Signals, Contingent Credit Lines, Asymmetric Information. JEL Classification: E2, E3, F3, F4, G0, C1.
Subjects
Series Statement
- Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 03-19
- Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 03-19.
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