A Balance Sheet Approach to Financial Crisis

64 Pages Posted: 14 Feb 2006

See all articles by Mark Allen

Mark Allen

International Monetary Fund (IMF)

Christoph B. Rosenberg

International Monetary Fund (IMF) - European Department

Christian Keller

International Monetary Fund (IMF)

Brad Setser

Roubini Global Economics, LLC; University College London

Nouriel Roubini

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

Date Written: December 2002

Abstract

The paper lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in the aggregate balance sheet of a country and the balance sheets of its main sectors (assets and liabilities). It focuses on the risks created by maturity, currency, and capital structure mismatches. This framework draws attention to the vulnerabilities created by debts among residents, particularly those denominated in foreign currency, and it helps to explain how problems in one sector can spill over into other sectors, eventually triggering an external balance of payments crisis. The paper also discusses the potential of macroeconomic policies and official intervention to mitigate the cost of such a crisis.

Keywords: National balance sheets, financial crisis, IMF policy, emerging markets

JEL Classification: E00, F02, F32, F33, F34, F42, G15, G18

Suggested Citation

Allen, Mark and Rosenberg, Christoph and Keller, Christian and Setser, Brad and Roubini, Nouriel, A Balance Sheet Approach to Financial Crisis (December 2002). IMF Working Paper, Vol. , pp. 1-64, 2002. Available at SSRN: https://ssrn.com/abstract=880876

Mark Allen

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Christoph Rosenberg

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Christian Keller

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Brad Setser

Roubini Global Economics, LLC ( email )

131 Varick Street, Suite 1005
New York, NY 10013
United States

University College London ( email )

Gower Street
London
United Kingdom

Nouriel Roubini

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

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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