Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets

Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies -- Nouriel Roubini, Brad Setser, Institute for International Economics

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Authors: Brad Setser

Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies

Authors: Nouriel Roubini

by Nouriel Roubini and Brad Setser

International Finance/ Macroeconomics: Finance, Investment, and Debt

August 2004 • 348 pp. ISBN paper 0-88132-371-3 • $28.95

News Release Bailouts or Bail-ins? is masterful. It is by far the best book written in recent years on the vexing subject of how the international community should address international financial crises of emerging market economies.

Roughly once a year, the managing director of the International Monetary Fund, the U.S. treasury secretary and in some cases the finance ministers of other G-7 countries will get a call from the finance minister of a large emerging market economy. The emerging market finance minister will indicate that the country is rapidly running out of foreign reserves, that it has lost access to international capital markets and, perhaps, that is has lost the confidence of its own citizens. Without a rescue loan, it will be forced to devalue its currency and default either on its government debt or on loans to the country’s banks that the government has guaranteed. This book looks at these situations and the options available to alleviate the problem. It argues for a policy that recognizes that every crisis is different and that different cases need to be handled within a framework that provides consistency and predictability to borrowing countries as well as those who invest in their debt.

Jeffrey D. Sachs, Contents Director of the Earth Institute, Columbia University Preface Bailouts or Bail-ins? will prove to be a useful tool for those confronting these crises, and a clear, accessible overview for those studying global markets.

Acknowledgments 1. Introduction 2. New Nature of Emerging-Market Crises 3. Analytical Literature on Crisis Resolution

Lawrence H. Summers, President, Harvard University 4. Experience with Bailouts and Bail-ins and Former U.S. Treasury Secretary

5. Official Policy Toward Crisis Resolution

This is the most intelligent and comprehensive analysis yet of how the international community should respond to financial crises. . . It will be the

6. Responding to Liquidity Shortages 7. Seniority of Sovereign Debts 8. Legal Reform

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International Finance/ Macroeconomics: Global Financial Crises International Finance/ Macroeconomics: International Monetary Fund International Finance/ Macroeconomics: Exchange Rate Regimes/Monetary Policy

Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies -- Nouriel Roubini, Brad Setser, Institute for International Economics

definitive work on this subject for some time to come.

9. Recommendations for Reform Appendix

Barry Eichengreen, George C. Pardee and Helen N. Pardee References Professor of Economics and Political Science, Glossary University of California, Berkeley

Index

A fluid and deeply informed synthesis of the recent debate on how to improve sovereign debt workouts. Roubini and Setser’s book will likely be a standard reference for many years to come. Kenneth Rogoff, Harvard University The Rubin-Summers era policy wonks take on financial architecture, matured by distance, turbocharged with academic authority. Jeromin Zettelmeyer, International Monetary Fund The analysis is thorough, conclusions are well supported by empirical evidence, and recommendations soundly reasoned. Highly recommended. Choice

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