search query: @author Corsetti, G. / total: 4
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| Author: | Corsetti, G. Pesenti, P. Roubini, N. |
| Title: | A model of the Asian crisis |
| Journal: | European Economic Review
1999 : JUN, VOL. 43:7, p. 1211-1236 |
| Index terms: | ASIA CRISES MODELS MORAL HAZARD BALANCE OF PAYMENTS |
| Language: | eng |
| Abstract: | This paper develops an interpretation of the Asian meltdown focused on moral hazard as the common source of over-investments, excessive external borrowing, and current account deficits. To the extent that foreign creditors are willing to lend to domestic agents against future bail-out revenue from the government, unprofitable projects and cash shortfalls are re-financed through external borrowing. While public deficits need not be high before a crisis, the eventual refusal of foreign creditors to refinance the country's cumulative losses forces the government to step in and guarantee the outstanding stock of external liabilities. |
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