Balance Sheet Effects,Bailout Guarantees and Financial Crises

摘要

This paper provides a model of boom-bust episodes in middle-income countries.It is based on sectoral differences in corporate finance:the nontradables sector is special in that it faces a contract enforceability problem and enjoys bailout guarantees.As a result,currency mismatch and borrowing constraints arise endogenously in that sector.This sectoral asymmetry allows the model to replicate the main features of observed boom-bust episodes.In particular,episodes begin with a lending boom and a real appreciation,peak in a self-fulfilling crisis during which a real depreciation coincides with widespread bankruptcies,and end in a recession and credit crunch.The nontradables sector accounts for most of the volatility in output and credit.