Debt crises
| Reading: Blustein, P., 2005, “And the Money Kept Rolling In” Public Affairs (pp.39-60)
Discussion question: As of July 1998 should the IMF suspend their program in Argentina, or continue their support? |
Textbook Reading: Chapter 8 (Section 8.3; pp. 278-280) and Chapter 10 (Section 10.4; pp. 357-366)
Although I use Chapter 3 as the pre reading for this class, I highly recommend the full book: “And the Money Kept Rolling In (and Out)”. Here’s The Economist’s summary.
To understand the dynamics of a sovereign debt crisis, use this model from The Economist.
Recommended audio
A 2016 episode of the podcast Planet Money looked at sovereign debt crises, and is well worth a listen. The title was “A Hedge Fund, A Country, And A Big Sailboat“. I also recommend listening to Tyler Cowen’s interview with Pierpaolo Barbieri, the CEO of Uala, where they discuss Argentina’s reforms as well as a broader look at the Latin American start up prospects and culture (start at 22:55).
Recommended reading
- Escolano, J., “A Practical Guide to Public Debt Dynamics, Fiscal Sustainability, and Cyclical Adjustment of Budgetary Aggregates“, IMF, January 2010
| Instructor Resource: “Argentina: What Happened Next?” January 2014 |
| Lecture handout: Financial Stability* |
| Activity: Complete the Stock Market Crash worksheet |
The key goal for monetary authorities is credibility: [Credibility flashcard]
What constitutes an optimal currency areas? [Optimal Currency Areas flashcard]
| Learning Objectives: Understand the causes of a sovereign debt crisis. Understand the role international agencies play in managing a debt crisis.
Focus on diversity: The highly influential paper on sovereign debt tipping points was co authored by Carmen Reinhart, a Cuban-born economist who became Chief Economist of the World Bank in 2020. |