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- W1551373254 abstract "Even well managed emerging market economies are exposed to significant external risk. The bulk of this risk is financial. At a moment’s notice, these economies may be required to reverse the capital inflows that have supported the preceding boom. Even if such reversal does not take place, its anticipation often leads to costly precautionary measures and recessions. In this paper we characterize the business cycle of an economy that needs to borrow on average but faces stochastic financial constraints. We focus on the optimal financial policy of such an economy under different imperfections in its hedging opportunities. The model is simple enough to be analytically tractable but flexible and realistic enough to provide quantitative guidance. ∗We thank the macro lunch participants at MIT for their commnets and Andrei Levchenko for excellent research assistance. Caballero thanks the NSF for financial support." @default.
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- W1551373254 date "2003-01-01" @default.
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- W1551373254 title "Hedging sudden stops & precautionary recessions : a quantitative framework" @default.
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