Stiglitz Versus the IMF on the Asian Debt Crisis: An Intertemporal Model with Real Exchange Rate Overshooting.

Working paper

This paper develops a real model of financial crisis, and uses it to elucidate the controversy between Joe Stiglitz and the IMF concerning the Asian financial crisis. Borrowers of foreign capital are bound by lending contracts to pay the world rate of return on their borrowing, following an adverse shock; by assumption, they do not default. This is onerous, since the shock makes the marginal product of capital fall to less than the world rate of return, and creates a debt overhang on which in...

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Authors: Kirsanova, T; Menzies, G; Vines, D

• Publisher: CEPR
• Host title: C.E.P.R. Discussion Papers
• Series: C.E.P.R. Discussion Papers
• Volume: 6318
• Publication date: 2007-01-01
• Paper number: 6318
• Language: English