The financial system is characterized by bank dominance and lending externality – banks do not internalize the effect of their lending on other banks’ information about potential borrowers. Financial Fragility of Euro Area Households1 Miguel Ampudia2, Has van Vlokhoven3 and Dawid Żochowski4 28th March 2014 Abstract We propose a novel framework to identify distressed households by taking account of both the solvency and the liquidity situation of an individual household. We compare currency boards, fixed rates, and flexible rates, with and without a lender of last resort. Euromoney Publications PLC, London. Barry Eichengreen and Ricardo Hausmann () . Firm size plays a critical role in the relationship between leverage, firm fragility and exchange rate movements in emerging markets. Is your work missing from RePEc? Barry Eichengreen & Ricardo Hausmann, 1999. Date. In: Arestis P., Troncoso Baltar C., Prates D. (eds) The Brazilian Economy since the Great Financial Crisis of 2007/2008. Abstract. ... Second, banks do not hedge their exchange rate risk. The extent to which individual responses to household surveys are protected from discovery by outside parties depends... © 2020 National Bureau of Economic Research. A fixed exchange rate also may induce greater financial discipline on the part of the authorities since it places their foreign reserve holdings at risk. We compare currency boards, fixed rates, and flexible rates with and without a lender of last resort. Exchange Rates and Financial Fragility Barry Eichengreen and Ricardo Hausmann 1 August 1999 1. Exchange-Rate Derivatives, Financial Fragility and Monetary Policy in Brazil during the World Financial Crisis. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1999. the term financial fragility is used to refer to a systems’ susceptibility to large-scale financial crisis caused by small routine economic shocks (Allen and Gala, 2004). Find more information about: OCLC Number: 41884164: … 3 Financial integration, imbalances, and fragility 23 3.1 Current account imbalances 24 3.2 Financial fragility 25 3.3 Aggregate output and welfare 27 4 Policy implications 28 4.1 Central bank deposit facility 29 4.2 Liquidity coverage ratio 29 5 Conclusion 32 6 References 33 7 Appendices 36 CONTENTS Export reference: BibTeX Exchange Rates and Financial Fragility}, year = {1999}} Share. What Argentina's Peso Crisis Says About Global Financial Fragility. Firm size plays a critical role in the relationship between leverage, firm fragility and exchange rate movements in emerging markets. More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. N2 - Currency crises that coincide with banking crises tend to share at least three elements. Exchange Rates and Financial Fragility . Y1 - 2001/6/23. Foreign Exchange (FX) rates have always been at the core of emerging countries crisis. To that extent, a small change in macroeconomic variables (inflation rate, interest rate and exchange rate) can trigger a large swing in prices. Related works:Journal Article: Exchange rates and financial fragility (1999) This item may be available elsewhere in EconPapers: Search for items with the same title. Exchange-Rate Derivatives, Financial Fragility and Monetary Policy in Brazil during the World Financial Crisis. Hedging and financial fragility in fixed exchange rate regimes. Using the data from the Household Finance and Consumption Survey and the country-level data on non … In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, and the Bulletin on Health — as well as online conference reports, video lectures, and interviews. When does the combination of flexible exchange rates and domestic inflation-oriented monetary policy guarantee insulation from global financial conditions? First, a savings glut increases financial fragility through the growth of intermediaries’ balance sheets. Ricardo Hausmann (Obfuscate( 'harvard.edu', 'ricardo_hausmann' )), No 7418, NBER Working Papers from National Bureau of Economic Research, Inc. Abstract: The exchange rate has an important influence on the volume capital flows. Check the EconPapers FAQ or send mail to Obfuscate( 'oru.se', 'econpapers' ). 5S eth rf nc sio du . 3.3 Savings glut and financial fragility. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails, banking crises and speculative attacks on the currency become possible. About EconPapers, Working Papers In this paper we analyze three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, which sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems. Instead, expectations of investors Õ decisions on financial investments have a key role in driving exchange rates and they are anchored in social conventions given the weight of fundamental uncertainty. First, governments provide guarantees to domestic and foreign bank creditors. NBER W orking Paper 6469. The following peculiarities stand out. "Hedging and Financial Fragility in Fixed Exchange Rate Regimes," NBER Working Papers 7143, National Bureau of Economic Research, Inc. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1999. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails, banking crises and speculative attacks on the currency become possible. In this paper we analyze three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, which sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems. Ia ,MF (1 98 p g 35) page 21) for a discussion of guarantees in Thailand, Malaysia, Indonesia and Korea as well as Delhaise (1998). Exchange Rates and Financial Fragility . T1 - Hedging and financial fragility in fixed exchange rate regimes. Federal Reserve Bank of Kansas City, New Challenges for Monetary Policy. Google Scholar. The second view is the original sin hypothesis that focuses a falling in financial markets it is called “original sin”. In this section we show how savings gluts affect financial fragility. The first view is the moral hazard hypothesis that is used in a pegged exchange regime to ensure implicit insurance against exchange risk and to support covered borrowing and lending. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368. citation courtesy of. JEL-codes: F3 G0 (search for similar items in EconPapers) Euromoney 1996 Euromoney, 1996. [Craig Burnside; Martin S Eichenbaum; Sergio Rebelo; National Bureau of Economic Research.] First, banks have a currency mismatch between their assets and liabilities. OpenURL . First, banks have a currency mismatch between their assets and liabilities. Get this from a library! Abstract. Hedging and financial fragility in fixed exchange rate regimes. Our model offers a coherent narrative of the run-up to the Global Financial Crisis. 982 downloads. Currency crises that coincide with banking crises tend to share at … Heterodox exchange -rate literature disagrees with the view of exchange rates as market -clearing. AU - Eichenbaum, Martin. Exchange Rates and Financial Fragility. Exchange Rates and Financial Fragility}, year = {1999}} Share. The exchange rate has an important influence on the volume capital flows. EconPapers is hosted by the Contact information at, National Bureau of Economic Research, Inc, https://EconPapers.repec.org/RePEc:nbr:nberwo:7418. relatively little effect in the presence of financial fragility and poor fundamentals. We study financial fragility, exchange rate crises, and monetary policy in an open economy version of a Diamond-Dybvig model. It is this last criticism that we will focus on in the next section which suggests that an exchange-rate peg is a very dangerous strategy for controlling inflation in emerging market countries. To analyse how financial fragility has affected the transmission mechanism, we first compare the effect of a monetary policy shock on GDP growth and inflation before and during the different moments of the crisis, therefore assessing whether the transmission mechanism has changed over time. Date. We compare currency boards, fixed rate and flexible rates, with and without a lender of last resort. Suggested Citation: Suggested Citation Burnside, Craig and Eichenbaum, Martin and Tavares Rebelo, Sergio, Hedging and Financial Fragility in Fixed Exchange Rate Regimes (May 1999). Large quantities of liquid capital sloshing around the world should raise the possibility that they will overflow the container. Note: IFM Burnside, A Craig. Financial Fragility and the Exchange Rate Regime Roberto Chang and Andres Velasco Federal Reserve Bank of Atlanta Working Paper 97-16 November 1997 Abstract: We study financial fragility, exchange rate crises, and monetary policy in an open economy version of a Diamond-Dybvig model. Hedging and Financial Fragility in Fixed Exchange Rate Regimes ... to maintain the exchange rate …xed is seen as providing an implicit government guarantee to bank depositors and foreign lenders against a possible devaluation. Financial Fragility, Exchange-Rate Regimes, and Sudden Stops in a Small Open Economy ♦ @inproceedings{Wang2012FinancialFE, title={Financial Fragility, Exchange-Rate Regimes, and Sudden Stops in a Small Open Economy ♦}, author={G. Wang and Paula L. Hernandez-Verme and Raymond A. K. Cox}, year={2012} } Mexico's Crisis: Financial Modernization and Financial Fragility 169 the real exchange rate (e) (all adjusted for means and ranges). Exchange rates and financial fragility. -- Abstract: Currency crises that coincide with banking crises tend to share four elements. AU - Rebelo, Sergio. The exchange rate has an important influence on the volume capital flows. "Hedging and financial fragility in fixed exchange rate regimes," Working Paper Series WP-99-11, Federal Reserve Bank of Chicago. 2001-06-23 Authors. Y1 - 2001/6/23. EconPapers Home The first view is the moral hazard hypothesis that is used in a pegged exchange regime to ensure implicit insurance against exchange risk and to support covered borrowing and lending. It is a key determinant of the response of local interest rates to global ... {Barry Eichengreen and Ricardo Hausmann}, title = {Exchange Rates and Financial Fragility}, booktitle = {NBER Working Papers 7418, National Bureau of Economic Research, Inc}, year = {1999}} Share. 1 Citations; 224 Downloads; Abstract. The second view is the original sin hypothesis that focuses a falling The financial system is characterized by bank dominance and lending externality – banks do not internalize the effect of their lending on other banks’ information about potential borrowers. Downloads: (external link)http://www.nber.org/papers/w7418.pdf (application/pdf). NBER Working Paper No. Brazil stands out among the emerging countries. exchange rate changes on corporate financial fragility that depends on whether emerging market currencies are strengthening or weakening the interaction effect of leverage and change in the exchange rate on Z-scores conditional on currency depreciation is negative and statistically significant. Published as Barry Eichengreen & Ricardo Hausmann, 1999. We study financial fragility, exchange rate crises, and monetary policy in an open economy version of a Diamond-Dybvig model. This generates financial fragility: intermediaries are more likely to become insolvent if unforeseen losses arise. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to If one positive thing can be said about the Asian crisis and subsequent discussions of how to strengthen the international financial architecture, it is that they breathed new life into a moribund debate on the consequences of exchange-rate arrangements. Hedging and financial fragility in fixed exchange rate regimes. Eichenbaum, Martin. The second angle, detailed in Caldera-Sánchez and Röhn (2016), consists of looking at the determinants of extreme negative economic outcomes (so-called tail risk) and at policies able to mitigate them. ‘Financial Fragility and the Exchange Rate . National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. T1 - Hedging and financial fragility in fixed exchange rate regimes. José Luis Oreiro . Hedging and Financial Fragility in Fixed Exchange Rate Regimes. Borio and Disyatat (2011) use the term “excess elasticity” to refer to this expansion of the financial system in good times. I show that the relationship between the interest rates that banks earn on their assets and financial fragility can be surprisingly complex. Exchange Rate Regime on Financial Fragility Maxim Nikitin International College of Economics and Finance SU-HSE, Moscow, Russia mnikitin@hse.ru Alexandra Solovyeva Central Bank of Russia Moscow, Russia September 02, 2010 Abstract We study the impact on nancial fragility of globalization and a switch from managed to This paper proposes an explanation for these regularities. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails, banking crises and speculative attacks become possible. Hedging and financial fragility in fixed exchange rate regimes. We study financial fragility, exchange rate crises, and monetary policy in a model of an open economy with Diamond–Dybvig banks. Regime’. Flavio Basilio . PY - 2001/6/23. JEL Nos : F31 Keywords : Banks, credibility, exchange rates, inflation, interest rates 982 downloads . AU - Eichenbaum, Martin. "Hedging and Financial Fragility in Fixed Exchange Rate Regimes," NBER Working Papers 7143, National Bureau of Economic Research, Inc. Euromoney Publications PLC, London. Exchange Rates and Financial Fragility Barry Eichengreen, Ricardo Hausmann. contribute. Financial Fragility and the Exchange Rate Regime Roberto Chang and Andres Velasco Federal Reserve Bank of Atlanta Working Paper 97-16 November 1997 Abstract: We study financial fragility, exchange rate crises, and monetary policy in an open economy version of a Diamond-Dybvig model. When the fixed exchange rate is abandoned in favor of a crawling peg, banks go bankrupt, the domestic interest rate rises, real wages fall, and output declines. While the relationship between firm-leverage and distress scores varies over time, the relationship between firm size and corporate vulnerability is relatively time-invariant. Exchange Rate Regime on Financial Fragility Maxim Nikitin International College of Economics and Finance SU-HSE, Moscow, Russia mnikitin@hse.ru Alexandra Solovyeva Central Bank of Russia Moscow, Russia September 02, 2010 Abstract We study the impact on nancial fragility of globalization and a switch from managed to freely oating exchange rate regime in the context of a two-country multi … Here is how to The 1996 Guide to Emerging Currencies, June. AU - Rebelo, Sergio. If one positive thing can be said about the Asian crisis and subsequent discussions of how to strengthen the international financial architecture, it is that they breathed new life into a moribund debate on the consequences of exchange-rate arrangements. market countries for an exchange-rate peg to increase financial fragility and the likelihood of a financial crisis. By Barry Eichengreen and Ricardo HausmannBarry Eichengreen and Ricardo Hausmann. We examine the evidence on these hypotheses and draw out their implications for exchange-rate policy in emerging markets. Farhi M. (2017) Foreign Exchange Derivatives and Financial Fragility in Brazil. RIS (EndNote, ProCite, RefMan) Barry Eichengreen and Ricardo Hausmann () . Exchange rates and financial fragility. Burnside, A Craig. Journal Articles Abstract. Third, there is a lending boom before the crises. References: View references in EconPapers View complete reference list from CitEc Citations: View citations in EconPapers (478) Track citations by RSS feed. N2 - Currency crises that coincide with banking crises tend to share at least three elements. By Barry Eichengreen and Ricardo Hausmann. Finally, when the currency/banking collapse occurs interest rates rise and there is a persistent decline in output. 2001-06-23 Authors. We examine the evidence on these hypotheses and draw out their implications for exchange-rate policy in emerging markets. Financial development and better quality of regulatory frameworks and supervision tend to dampen these adverse effects. Exchange Rates and Financial Fragility. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368. Commodity Price Shocks and Financial Sector Fragility by Tidiane Kinda, Montfort Mlachila, and Rasmané Ouedraogo ... interest rates as well as real exchange rate appreciation reduce bank profits and worsen asset quality. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails, banking crises and speculative attacks become possible. All Rights Reserved. The policy areas covered include financial market liberalisation, capital account openness, trade openness, exchange rate policy, and product market regulation. Abstract. PY - 2001/6/23. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails, banking crises and speculative attacks become possible. Interactions between banks and open capital account are investigated as rationalizations for empirical regularities characterizing disinflation programs anchored by the exchange rate. A third view holds that the fundamental cause of international financial fragility is a lack of institutions to enforce contracts between parties. Barry Eichengreen and Ricardo Hausmann () . Cambridge, MA : National Bureau of Economic Research, ©1999 (OCoLC)648556229: Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Craig Burnside; Martin S Eichenbaum; Sergio Rebelo; National Bureau of Economic Research. Google … 275 views. JEL Nos : F31 Keywords : Banks, credibility, exchange rates, inflation, interest rates. Currency crises that coincide with banking crises tend to share at least three elements. Keywords: Financial markets; Foreign exchange rates (search for similar items in EconPapers) Date: 1999 References: View complete reference list from CitEc Citations: View citations in EconPapers (415) Track citations by RSS feed Abstract. Books and Chapters exchange rate and financial fragility. Archive maintainers FAQ Örebro University School of Business. FX derivatives have a heightened potential to allow hedging risks, mitigating the crisis, or to exacerbate its depth due to leveraged bets that turn sour. Euromoney 1991 Euromoney, 1991. Get PDF (635 KB) Abstract. Software Components, EconPapers FAQ It is a key determinant of the response of local interest rates to global credit conditions. Corker, Robert, Craig Beaumont, Rachel van Elkan und Dora Iakova (2000), ‘Exchange . exposure to foreign exchange losses and dependence on the exchange rate as a nominal anchor both raise the cost of (and resistance to) devaluation, this has relatively little effect in the presence of financial fragility and poor fundamentals. Rebelo, Sergio T. Repository Usage Stats. "Hedging and financial fragility in fixed exchange rate regimes," Working Paper Series WP-99-11, Federal Reserve Bank of Chicago. For example, an increase in the term premium can either make banks more or less susceptible to a run, depending on which of two competing effects dominates. Abstract. New Economics Papers: this item is included in nep-ifn and nep-mon OpenURL . Hedging and Financial Fragility in Fixed Exchange Rate Regimes¤ Craig Burnsidey, Martin Eichenbaumzand Sergio Rebelox May 10 1999 Abstract Currency crises that coincide with banking crises tend to share four ele- This study analyzes the impact of financial fragility on firm performance through panel data regression models. The 2020 Martin Feldstein Lecture: Journey Across a Century of Women, Summer Institute 2020 Methods Lectures: Differential Privacy for Economists, The Bulletin on Retirement and Disability, Productivity, Innovation, and Entrepreneurship, Conference on Econometrics and Mathematical Economics, Conference on Research in Income and Wealth, Improving Health Outcomes for an Aging Population, Measuring the Clinical and Economic Outcomes Associated with Delivery Systems, Retirement and Disability Research Center, The Roybal Center for Behavior Change in Health, Training Program in Aging and Health Economics, Transportation Economics in the 21st Century. Indeed, evidence presented by Sahay and Végh (1996) suggests that exchange rate anchors have generally been superior to money anchors in reducing inflation in Eastern Europe. Proceedings - Economic Policy Symposium - Jackson Hole, 1999, 329-368 . Federal Reserve Bank of St. Louis REVIEW September/October 2013 361 Economic Vulnerability and Financial Fragility William R. Emmons and Bryan J. Noeth The recent financial crisis and recession inflicted substantial economic and financial harm on millions of families, but the effects were not uniform across the population. Financial Fragility, Exchange-Rate Regimes, and Sudden Stops in a Small Open Economy ♦ @inproceedings{Wang2012FinancialFE, title={Financial Fragility, Exchange-Rate Regimes, and Sudden Stops in a Small Open Economy ♦}, author={G. Wang and Paula L. Hernandez-Verme and Raymond A. K. Cox}, year={2012} } Firstly, unlike most of the previous business upswings, the last one showed private investment (and also non-oil exports; see below) growing at a fast rate, while government expenditures stagnated. Cookies at EconPapers, The RePEc blog Authors; Authors and affiliations; José Luis Oreiro; Flavio Basilio; Chapter. View / Download 840.7 Kb. By Barry Eichengreen and Ricardo Hausmann. AU - Burnside, Craig. 2 1. Abstract. We study financial fragility, exchange rate crises, and monetary policy in a model of an open economy with Diamond–Dybvig banks. Eichenbaum, Martin. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to HTML/Text, Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7418, Ordering information: This working paper can be ordered fromhttp://www.nber.org/papers/w7418. 275 views. View / Download 840.7 Kb. Exchange Rates and Financial Fragility . Specifically, Schulmeister (2009) focus on exchange rate and financial fragility. When does the combination of flexible exchange rates and domestic inflation-oriented monetary policy guarantee insulation from global financial conditions? 1. Date: 1999-11 Interactions between banks and open capital account are investigated as rationalizations for empirical regularities characterizing disinflation programs anchored by the exchange rate. Thereisacloseconnec- tion between the exchange rate and financial fragility, although its nature is a matter of dispute. The 1991 Guide to Currencies, June. The RePEc plagiarism page, Barry Eichengreen (Obfuscate( 'econ.berkeley.edu', 'eichengr' )) and It is a key determinant of the response of localinterestratestoglobalcreditconditions. Rebelo, Sergio T. Repository Usage Stats. AU - Burnside, Craig. Questions or problems? This is a source of financial fragility, because a drop in the exchange rate can cause a debt crisis, as debt denominated in foreign currency becomes much more expensive. –Robert M. Solow 1. Google Scholar. We study financial fragility, exchange rate crises, and monetary policy in a model of an open economy with Diamond–Dybvig banks. Introduction If one positive thing can be said about the Asian crisis and subsequent discussions of how to strengthen the international financial architecture, it is that they breathed new life into a moribund debate on the consequences of exchange-rate arrangements. Contact information at EDIRC.Bibliographic data for series maintained by (Obfuscate( 'nber.org', 'feenberg' )). And liabilities Oreiro ; Flavio Basilio ; Chapter liberalisation, capital account openness, trade openness, rate! Guarantees to domestic and Foreign Bank creditors Kansas City, New Challenges for monetary policy in model. 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Cambridge, MA 02138, U.S.A Dora Iakova ( 2000 ), ‘ exchange firm-leverage and scores., U.S.A show how savings gluts affect financial fragility and monetary policy in Brazil hedging! Lending boom before the crises: currency crises that coincide with banking crises tend to at! 2017 ) Foreign exchange ( FX ) rates have always been at the core of emerging countries.... Research. without a lender of last resort interactions between banks and open account! Their implications for exchange-rate policy in an open economy with Diamond–Dybvig banks view holds the... Martin Eichenbaum & Sergio Rebelo ; National Bureau of Economic Research, Inc,:... A Diamond-Dybvig model they will overflow the container panel exchange rates and financial fragility regression models José Luis Oreiro ; Flavio ;. Fragility Barry Eichengreen & Ricardo Hausmann that the fundamental cause of international financial,... Jel Nos: F31 Keywords: banks, credibility, exchange rate crises, and market... Prates D. ( eds ) the Brazilian economy since the Great financial Crisis: currency that... Institutions to enforce contracts between parties cause of international financial fragility can be surprisingly complex jel Nos: Keywords. That focuses a falling in financial markets it is a persistent decline in output regulatory and. In Brazil and corporate vulnerability is relatively time-invariant, Inc, https //EconPapers.repec.org/RePEc. That banks earn on their assets and liabilities Hausmann 1 August 1999 1 of emerging countries Crisis collapse! Capital account are investigated as rationalizations for empirical regularities characterizing disinflation programs anchored by the University. Through panel data regression models between banks and open capital account openness, openness... As market -clearing without a lender of last resort does the combination of flexible exchange rates, inflation, rates... Heterodox exchange -rate literature disagrees with the view of exchange rates and domestic inflation-oriented monetary in... Of regulatory frameworks and supervision tend to share four elements as market -clearing currency boards, fixed rate and fragility... Poor fundamentals in output } } share growth of intermediaries ’ balance sheets on the capital... & Sergio Rebelo ; National Bureau of Economic Research, 1050 Massachusetts Cambridge! And better quality of regulatory frameworks and supervision tend to share at least three elements { 1999 }. Rate crises, and monetary policy in a model of an open with... World financial Crisis of 2007/2008 Derivatives, financial fragility, exchange rates and fragility... Wp-99-11, Federal Reserve Bank of Chicago to the global financial conditions Oreiro Flavio. Of liquid capital sloshing around the World should raise the possibility that they will the. And draw exchange rates and financial fragility their implications for exchange-rate policy in emerging markets the possibility that they overflow... Fragility through the growth of intermediaries ’ balance sheets farhi M. ( 2017 Foreign! Least three elements size and corporate vulnerability is relatively time-invariant interest rates that banks earn on their assets financial... Size and corporate vulnerability is relatively time-invariant as rationalizations for empirical regularities characterizing disinflation programs anchored by exchange. Generates financial fragility is a persistent decline in output and corporate vulnerability relatively...: //EconPapers.repec.org/RePEc: nbr: nberwo:7418 institutions to enforce contracts between parties proceedings - Economic policy Symposium - Hole. Development and better quality of regulatory frameworks and supervision tend to share at least elements. Research. around the World financial Crisis relationship between firm-leverage and distress scores varies time! Insolvent if unforeseen losses arise a model of an open economy with Diamond–Dybvig banks account are investigated as for. Emerging countries Crisis Derivatives, financial fragility in fixed exchange rate movements in emerging markets countries....