Original Sin, Balance-Sheet Crises, and the Roles of International Lending

Edited by Olivier Jeanne and Jeromin Zettelmeyer

in Other People's Money

Published by University of Chicago Press

Published in print February 2005 | ISBN: 9780226194554
Published online February 2013 | e-ISBN: 9780226194578 | DOI:
Original Sin, Balance-Sheet Crises, and the Roles of International Lending

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This chapter explains the role of international lending in the context of the “balance-sheet approach” to financial crises. The general consensus that foreign-currency debt is problematic masks a surprising variety of opinions and models of the dangers involved. Rather than presenting one more model of the dangers of foreign-currency debt, the chapter presents a framework that is general and flexible enough to organize a discussion of the recent literature, in a way that is not dependent on modeling details. The first part of the chapter can be viewed as a brief tour of the literature for the practitioner. In the second part, it discusses some of the challenges for domestic policies that arise in this framework, and the potential roles for international crisis lending.

Keywords: international lending; balance-sheet approach; financial crises; foreign-currency debt; domestic policies

Chapter.  10783 words.  Illustrated.

Subjects: International Economics

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