ADM 3318 Lecture Notes - Lecture 12: Speculative Attack, Currency Crisis, Moral Hazard
16 Jun 2018
School
Department
Course
Professor
The Global Monetary System
Financial Crises in the Post-Bretton Woods Era
Currency crisis occurs when a speculative attack on the
exchange value ofa currency results in a sharp deprecation
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Banking crisis refers to a loss of confidence in the banking
system
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Foreign debt crisis is a situation in which a country cannot
service its foreign debt obligations, whether private or
government debt
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Evaluating the IMF policy prescription
All IMF loan packages comes with conditions attached
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Inappropriate policies
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One criticism is that the IMF's traditional policy prescriptions
represent a "one-size-fits-all" approach to macroeconomic
policy that is inappropriate for many countries
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Moral hazard
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A second criticism of the IMF is that its rescue efforts are
exacerbating a problem known to economists as moral hazard
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Moral hazard arises when people behave recklessly because
they know they will be saved if things go wrong
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Lack of accountability
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The final criticism of the IMF is that it has become too
powerful for an institution that lacks any real mechanism for
accountability
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Class 12 - Feb. 14th
Wednesday, February 14, 2018
08:58
Document Summary
Currency crisis occurs when a speculative attack on the exchange value ofa currency results in a sharp deprecation. Banking crisis refers to a loss of confidence in the banking system. Foreign debt crisis is a situation in which a country cannot service its foreign debt obligations, whether private or government debt. All imf loan packages comes with conditions attached. One criticism is that the imf"s traditional policy prescriptions represent a one-size-fits-all approach to macroeconomic policy that is inappropriate for many countries. A second criticism of the imf is that its rescue efforts are exacerbating a problem known to economists as moral hazard. Moral hazard arises when people behave recklessly because they know they will be saved if things go wrong.
