TY  - JOUR
AU  - Chinn,Menzie D.
AU  - Dooley,Michael P.
AU  - Shrestha,Sona
TI  - Latin America and East Asia in the Context of an Insurance Model of Currency Crises
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7091
PY  - 1999
Y2  - April 1999
UR  - http://www.nber.org/papers/w7091
L1  - http://www.nber.org/papers/w7091.pdf
N1  - Author contact info:
Menzie D. Chinn
Dept. of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-7397
Fax: 608/262-2033
E-Mail: mchinn@lafollette.wisc.edu

Michael P. Dooley
Department of Economics
Engineering II
University of California, Santa Cruz
Santa Cruz, CA 95064
Tel: 831/459 3662
Fax: 831/459-5077
E-Mail: MPD@UCSC.EDU
AB  - This paper focuses on the 1995 Latin American and 1997 East Asian crises using an insurance-based model of financial crises.  First the model of Dooley (forthcoming) is described.  Second, some empirical evidence for an insurance model is presented. The key variables in this approach include the ratio of foreign exchange reserves to bank loans (domestic credit) extended to the private sector, the ability of the private sector to appropriate government assets, and appropriation as measured by capital flight.  We argue that the insurance model is consistent with the observed evolution of these variables in the recent crises in Latin America and Asia.   Finally, we examine the statistical evidence in favor of the model using panel regressions.  We find that the econometric results are consistent with the insurance model, and tend to support this approach over some competing explanations.
ER  -