Global Financial Crises Institutions and Incentives
26 Pages Posted: 15 Feb 2006
Date Written: June 2000
Increasing emphasis has been placed on the need for an effective lender of last resort for sovereign states and on procedures for sovereign debt restructuring to help cope with global financial crises. Where private creditors use short-term debt to check sovereign debtor`s moral hazard, there is the risk of self-fulfilling crises. In this context, we conclude that the proposal of the Meltzer Commissionfor unconditional financial support, but only to states that pre-qualifycould be the source of increased instability. After discussing analogies with private sector arrangements, we compare the operations of the existing Paris Club with proposed Chapter 11 style procedures.
Keywords: International monetary reform lender of last resort financial crises
JEL Classification: F31 F32 G20 G33
Suggested Citation: Suggested Citation