It is important to keep in mind that short-term debts owed to foreign banks are but just
one type of short-term foreign liability. Portfolio capital, bank deposits held by foreign nonbanks,
long-term loans with conversion covenants, and hedging instruments can all be withdrawn
very quickly, putting further pressure on foreign exchange reserves and the exchange rate. At the
same time, there may be other forms of foreign exchange assets in addition to official reserves that
can be drawn upon in the event of a foreign creditor panic. A priority for future research should
be to measure in a more comprehensive manner the short-term cross-border assets and liabilities
3
facing emerging market economies, and the role of various types of financial claims in the onset of
financial panic.
It is important to keep in mind that short-term debts owed to foreign banks are but justone type of short-term foreign liability. Portfolio capital, bank deposits held by foreign nonbanks,long-term loans with conversion covenants, and hedging instruments can all be withdrawnvery quickly, putting further pressure on foreign exchange reserves and the exchange rate. At thesame time, there may be other forms of foreign exchange assets in addition to official reserves thatcan be drawn upon in the event of a foreign creditor panic. A priority for future research shouldbe to measure in a more comprehensive manner the short-term cross-border assets and liabilities3facing emerging market economies, and the role of various types of financial claims in the onset offinancial panic.
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