Are asset price guarantees useful for preventing Sudden Stops?: A quantitative investigation of the globalization hazard-moral hazard tradeoff

• 成果类型: Article; Proceedings Paper
• 署名作者: Durdu, Ceyhun Bora; Mendoza, Enrique G.
• 署名单位: University System of Maryland; University of Maryland College Park; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2005.05.006
• 发表日期: 2006
• 页码: 84-119
• 关键词: Sudden stops; fisherian deflation; globalization hazard; moral hazard; price guarantees

摘要

An implication of the globalization hazard hypothesis is that 'Sudden Stops' caused by global financial frictions could be prevented by offering foreign investors price guarantees on emerging markets assets. These guarantees create a tradeoff, however, because they weaken globalization hazard while creating international moral hazard. We study this tradeoff using a quantitative, equilibrium asset-pricing model. Without guarantees, margin calls and trading costs cause Sudden Stops driven by a Fisherian deflation. Price guarantees prevent this deflation by propping up foreign demand for assets. The effectiveness of price guarantees, their distortions on asset markets, and their welfare implications depend critically on whether the guarantees are contingent on debt levels and on the price elasticity of foreign demand for domestic assets. (c) 2005 Elsevier B.V. All rights reserved.