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Rescue Packages and Output Losses Following Crises

Rescue Packages and Output Losses Following Crises

Chapter:
(p.125) 5 Rescue Packages and Output Losses Following Crises
Source:
Managing Currency Crises in Emerging Markets
Author(s):
Michael P. Dooley, Sujata Verma
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226155425.003.0007

This chapter deals with rescue packages and output losses following an exchange rate crisis. It analyzes the role of International Monetary Fund (IMF) in a game theoretic context and investigates why there are large output losses post-crisis. This chapter evaluates rescue packages in the context of an explicit model of crises and argues that the insurance model is an attractive vehicle for the analysis because it provides an explanation for surges in capital inflows followed by sudden stops.

Keywords:   rescue packages, output losses, exchange rate crisis, IMF, insurance model, capital inflows

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