A Self-Help Guide for Emerging Markets

Bibliographic Data

ID3418277
AuthorsMartin Feldstein (corresponding author)
Year1999
Volume78
Issue2
Pages93
Publication date1999-01-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueForeign Affairs (JOURNAL)
Journal identifiersISSN: 0015-7120 • E-ISSN: 2327-7793
PublisherJSTOR (PUBLISHER)
DOI10.2307/20049211
OpenAlexW1554485019
LanguageEN
Citations received15

Like death and taxes, international economic crises cannot be avoided. They will continue to occur as they have for centuries past. But the alarmingly rapid spread of the 1997 Asian crisis showed how shifting perceptions alone can disrupt even fundamentally stable countries. In the wake of Russia's default, skyrocketing interest rates in emerging markets underlined these economies' vulnerability to investor skittishness. Unfortunately, there is no international 911 that emerging markets can dial when facing economic collapse. Neither the International Monetary Fund (imf) nor a new global financial architecture will make the world less dangerous. Instead, countries that want to avoid a devastating rerun of the 1997-98 crisis must learn to protect themselves. And self-protection requires more than avoiding bad policies that make a currency crisis inevitable, for the threat of contagion makes even the virtuous vulnerable to currency runs. Liquidity is the key to financial self-help. A country that has substantial international liquidity?large foreign currency reserves and a ready source of foreign currency loans?is less likely to be the object of a currency attack. Substantial liquidity also enables a country already under a speculative siege to defend itself better and make more orderly financial adjustments. The challenge is to find ways to increase liquidity at reasonable cost

Business · Development economics · Economic system · Economics · Emerging markets · Macroeconomics · Political science · Global Financial Crisis and Policies

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