A Balance Sheet Approach to Financial Crisis

By M. Allen, Christoph B. Rosenberg, Christian Keller, Brad W. Setser, Nouriel Roubini. Social Science Research Network, 2002

291 citations recorded by the source corpus.

The paper lays out an analytical framework for understanding crises in emerging markets based on examination of stock variables in the aggregate balance sheet of a country and the balance sheets of its main sectors (assets and liabilities). It focuses on the risks created by maturity, currency, and capital structure mismatches. This framework draws attention to the vulnerabilities created by debts among residents, particularly those denominated in foreign currency, and it helps to explain how problems in one sector can spill over into other sectors, eventually triggering an external balance of payments crisis. The paper also discusses the potential of macroeconomic policies and official intervention to mitigate the cost of such a crisis.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e3ea1eee98f379a9826c3f0502c7190a55578ac2

Citations in the corpus

• Addicted to Dollars (2003, unknown): “Sectoral data on the foreign currency liabilities of different economic agents, and on the linkages across the balance sheets of those agents, are simply not available for the large majority of countries (see Allen et al. (2002)).”