TY  - JOUR
AU  - Rajan,Raghuram G.
TI  - Dollar Shortages and Crises
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10845
PY  - 2004
Y2  - October 2004
UR  - http://www.nber.org/papers/w10845
L1  - http://www.nber.org/papers/w10845.pdf
N1  - Author contact info:
Raghuram Rajan
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-4437
Fax: 773/702-0458
E-Mail: raghuram.rajan@ChicagoBooth.edu
AB  - Emerging markets do not handle adverse shocks well. In this paper, I will outline an explanation of why emerging markets are so fragile, and why they may adopt contractual mechanisms  -- such as a dollarized banking system -- that increase their fragility. I 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. I then examine how domestic policies, especially monetary policy, can mitigate the adverse effects of these crises. Finally, I will ask if there is a constructive role for international financial institutions both in helping to prevent the crises and in helping resolve them.
ER  -