Credit Frictions and Sudden Stops in Small Open Economies: An Equilibrium Business Cycle Framework for Emerging Markets Crises
- Topics:
- Investment and Capital Markets
- Tags:
- Emerging Market,
- Finance,
- Financial Accounting,
- Financial Friction,
- Financial Services,
- Friction,
- Inter-American Development Bank,
- Marketing,
- Marketing Research
- Source:
- Inter-American Development Bank
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Overview: Financial frictions are a central element of most of the models that the literature on emerging markets crises has proposed for explaining the Sudden Stop phenomenon. To date, few studies have aimed to examine the quantitative implications of these models and to integrate them with an equilibrium business cycle framework for emerging economies. This paper surveys these studies, viewing them as ability-to-pay and willingness-to-pay variations of a framework that adds occasionally binding borrowing constraints to the small open economy real-business-cycle model. The results show that the models can yield relatively infrequent.
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Format: PDF | Size: 1,434KB | Date: Sep 2002 | Pages: 78
