Emerging market financial crises during the late 1990s were marked by sudden withdrawals of funds by foreign creditors, resulting in production declines. The IMF favored positive signals to potential foreign creditors and initially recommended disciplined fiscal policy during the height of...

Intro -- Contents -- I. INTRODUCTION -- II. BACKGROUND -- III. THE MODEL -- A. Households -- B. Firms -- C. Government -- D. Domestic Financial Intermediary -- E. Foreign Creditor -- IV. EQUILIBRIUM CONDITIONS -- V. PARAMETERS -- VI. SIMULATIONS -- A. The Base Case -- B. Application of...