Will Sub‐Prime be a Twin Crisis for the United States?
Michael Dooley (),
David Folkerts‐Landau and
Review of International Economics, 2009, vol. 17, issue 4, 655-666
We identify incentives generated by the Bretton Woods II system that may have contributed to the sub‐prime liquidity crisis now working its way through the international monetary system. We then evaluate the persistent conjecture that the liquidity crisis is or will become a balance of payments crisis for the United States. Given that it happens, the additional costs associated with a sudden stop of net capital flows to the United States could be quite substantial. But we observe that emerging market governments have continued to acquire US assets even as yields have fallen, and the incentives for continuing to do so remain strong. Moreover, the Bretton Woods II system, which has clearly been the most resilient of the forces driving current markets, continues to generate low real interest rates in industrial countries and growth in emerging markets that will help limit the damage from the liquidity crisis.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Will Subprime be a Twin Crisis for the United States? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:17:y:2009:i:4:p:655-666
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576
Access Statistics for this article
Review of International Economics is currently edited by E. Kwan Choi
More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().