Dollar Shortages and Crises

Rajan, Raghuram

Dollar Shortages and Crises

No 10845, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Emerging markets do not handle adverse shocks well. In this paper, we lay out an argument about why emerging markets are so fragile, and why they may adopt contractual mechanisms -such as a dollarized banking system- that increase their fragility. We draw on this analysis to explain why dollarized economies may be prone to dollar shortages and twin crises. The model of crises described here differs in some important aspects from what is now termed the first, second, and third generation models of crises. We then examine how domestic policies, especially monetary policy, can mitigate the adverse effects of these crises. Finally, we consider the role, potentially constructive, that international financial institutions may undertake both in helping to prevent the crises and in helping to resolve them.

JEL-codes: F21 F32 F34 G15 G28 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-fin
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Raghuram G. Rajan & Ioannis Tokatlidis, 2005. "Dollar Shortages and Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September.

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Journal Article: Dollar Shortages and Crises (2005)
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