Financial Policies and the Prevention of Financial Crises in Emerging Market Countries

Frederic S. Mishkin

NBER Working Paper No. 8087
Issued in January 2001
NBER Program(s):   IFM

This paper outlines a set of financial policies that can help make financial crises less likely in emerging market countries. To justify these policies, the paper first explains what a financial crisis is, the factors that promote a financial crisis and the dynamics of a financial crisis. It then examines twelve basic areas of financial policies to prevent financial crises: 1) prudential supervision, 2) accounting and disclosure requirements, 3) legal and judicial systems, 4) market-based discipline, 5) entry of foreign banks, 6) capital controls, 7) Reduction of the role of state-owned financial institutions, 8) restrictions on foreign-denominated debt, 9) elimination of too-big-to-fail in the corporate sector, 10) sequencing financial liberalization, 11) monetary policy and price stability, 12) exchange rate regimes and foreign exchange reserves.

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Published:

• Mishkin, Frederic S. and Miguel A. Savastano. "Monetary Policy Strategies For Emerging Market Countries: Lessons From Latin America," Chinese Economic Studies, 2002, v44(2/3,Summer), 45-82. ,
• Frederic S. Mishkin & Andrew Crockett & Michael P. Dooley & Montek S. Ahluwalia, 2003. "Financial Policies," NBER Chapters, in: Economic and Financial Crises in Emerging Market Economies, pages 93-154 National Bureau of Economic Research, Inc.

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