Systemic Sudden Stops, Credit Lines, and Funding Liquidity

Gurbachan Singh
  • December 2013, Springer Science + Business Media
  • DOI: 10.1007/978-81-322-1659-9_17

Policy to deal with 'sudden stop'

What is it about?

Sudden stop of capital flows can have large economic costs. Foreign exchange reserves are a standard solution to the problem. However, there is a large and persistent cost of such reserves. A more economical safeguard is an international credit line. The chapter in the edited volume takes a close look at such a safeguard.

Why is it important?

After the East Asian Financial Crisis of 1997-98, there has been considerable emphasis on capital controls. However, international credit lines (and Pigouvian tax-subsidy schemes) can reduce, if not obviate, the need for such capital controls.


Gurbachan Singh

The economics of sudden stop is not well understood. It is a soft option to look for government intervention to deal with the problem. There is a need for a closer look at the possible market failure, and to devise policy solutions in the light of this analysis. This is indeed what the focus of the chapter.

Read Publication

The following have contributed to this page: Gurbachan Singh

In partnership with: