The Role of Industrial Country Policies in Emerging Market Crises

113 Pages Posted: 7 Dec 2001 Last revised: 25 Oct 2010

See all articles by Jeffrey A. Frankel

Jeffrey A. Frankel

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: December 2001

Abstract

This paper considers policies of the industrialized countries, as they pertain to crises in emerging markets. These fall into three areas: (1) their own macroeconomic policies, which determine the global financial environment; (2) their role in responding to crises when they occur, particularly through rescue packages, which have three components -- reforms in debtor countries, public funds from creditor countries, and private sector involvement; and (3) efforts to reform the international financial architecture, with the aim of lessening the frequency and severity of future crises. A recurrent theme is the tension between mitigating crises that occur, and the moral hazard that such efforts create in the longer term. In addition to reviewing these three areas of policy, we consider the institutions through which the more powerful countries exercise their influence. We conclude with a discussion of the debate over the sins of the International Monetary Fund, and proposals for reform.

Suggested Citation

Frankel, Jeffrey A. and Roubini, Nouriel, The Role of Industrial Country Policies in Emerging Market Crises (December 2001). NBER Working Paper No. w8634. Available at SSRN: https://ssrn.com/abstract=293247

Jeffrey A. Frankel (Contact Author)

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Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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