2004, English, Article, Working paper edition: Dealing with destabilizing 'market discipline' [electronic resource] / Daniel Cohen, Richard Portes. Cohen, Daniel, 1953-

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Bookmark: http://trove.nla.gov.au/version/9966621
Published
  • Cambridge, MA : National Bureau of Economic Research, c2004.
Language
  • English

Edition details

Title
  • Dealing with destabilizing 'market discipline' /​ Daniel Cohen, Richard Portes.
Author
  • Cohen, Daniel, 1953-
Other Authors
  • Portes, Richard.
  • National Bureau of Economic Research
Published
  • Cambridge, MA : National Bureau of Economic Research, c2004.
Medium
  • [electronic resource]
Series
Subjects
Summary
  • "If interest rates (country spreads) rise, debt can rapidly be subject to a snowball effect, which then becomes self-fulfilling with regard to the fundamentals themselves. This is a market imperfection, because we cannot be confident that the unaided market will choose the good equilibrium' over the bad equilibrium'. We see here a fundamental flaw in the process of market discipline. We propose a policy intervention to deal with this structural weakness in the mechanisms of international capital flows. This is based on a simple taxonomy that enables us to break down the origin of crises into three components: a crisis of confidence (spreads and currency crisis), a crisis of fundamentals (real growth rate), and a crisis of economic policy (primary deficit). The policy would seek to short-circuit confidence crises, partly by using IMF support to improve ex ante incentives"--National Bureau of Economic Research web site.
Notes
  • Title from PDF file as viewed on 1/​13/​2005.
  • Includes bibliographical references.
  • Also available in print.
Technical Details
  • System requirements: Adobe Acrobat Reader.
  • Mode of access: World Wide Web.
Language
  • English
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