This paper presents a model of capital account crises and uses it to study resolution mechanisms for both liquidity and solvency crises. It shows that liquidity crises should be dealt with by a standstill combined with IMF lending into arrears, whereas solvency crises should be resolved by debt...

In recent years, we appear to have entered an era of capital account crises. In response, a number of new crisis resolution ideas have been put forward, including the establishment of supranational institutions such as an international lender of last resort or an international bankruptcy court,...

This paper assesses various crisis resolution proposals using a theoretical model of (liquidity and solvency) crisis. The model suggests that payments standstills and last-resort lending are equally efficient means of dealing with liquidity crises, while coordinated lending through creditor...

We develop a model in which countries can protect themselves against shocks by subscribing to a credit union that shares the key features of the International Monetary Fund, or by self-insuring through accumulating reserves. We assess the impact of the increasing heterogeneity of the Fund's...

This paper presents a theoretical model of strategic default to assess how national and international policymakers should seek to influence the cost of default and the distribution of bargaining power in the event of a default. We find that, in the absence of restrictions on the parameter space,...

This paper demonstrates how a currency board can become vulnerable to a crises in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete...