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

28 Pages Posted: 15 Feb 2006

See all articles by Olivier Jeanne

Olivier Jeanne

International Monetary Fund (IMF) - Research Department; Ecole Nationale des Ponts et Chaussees (ENPC); Centre for Economic Policy Research (CEPR)

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics; CEPR

Date Written: December 2002

Abstract

We present a stylized framework which encompasses a variety of balance sheet approaches to currency crises that have been suggested in the literature, and analyze their policy implications. The common theme is that currency and maturity mismatches in private sector balance sheets constrain the capacity of monetary and fiscal policies to deal with self-fulfilling capital account crises, and generate a role for international crisis lending. International lending could be used to back domestic last-resort lending to banks, or to loosen fiscal constraints. Provided they have a sound fiscal position in normal times, this can make countries immune to self-fulfilling crises.

Keywords: Currency crises balance sheet mismatches international lending

JEL Classification: F32 F33 F34 G21

Suggested Citation

Jeanne, Olivier and Zettelmeyer, Jeromin, 'Original Sin', Balance Sheet Crises, and the Roles of International Lending (December 2002). IMF Working Paper, Vol. , pp. 1-28, 2002. Available at SSRN: https://ssrn.com/abstract=880936

Olivier Jeanne (Contact Author)

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

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Ecole Nationale des Ponts et Chaussees (ENPC) ( email )

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75007 Paris
France
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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