Financial Crises: And What to Do About Them

In this accessible study, the author provides a critical assessment of the official sector’s efforts to more effectively manage financial crises in emerging markets. Professor Eichengreen reviews international initiatives on both the crisis prevention and crisis resolution fronts. While crises will always be with us, he concludes that good progress has been made in limiting their spread and strengthening the international financial system. Ironically, however, official-sector initiatives in this area may in fact have made life more difficult for the poorest countries. Initiatives to limit the incidence of crises and threats to the stability of the international financial system should therefore be linked to an increase in development assistance designed to offset the extra burdens on the poorest countries. The other place where official efforts have fallen short is in creating new ways of resolving crises. The author argues that the old way - the official sector financing through the International Monetary Fund - is part of the problem, not part of the solution.