Chapter 7 International Lending and Financial Crises

Chapter 7 Chapter 7 International Lending and International Lending and

Financial CrisesFinancial Crises

[teaching targets and demands][teaching targets and demands]     To make students master the To make students master the

development of international lending to development of international lending to developing countries and the formative developing countries and the formative causes, characteristics and harms of causes, characteristics and harms of international financial crisis.international financial crisis.

[Teaching key and difficult points][Teaching key and difficult points]The formative causes, characteristics

and harms of international financial crisis.

[Content of courses ][Content of courses ] Gains and losses from well-behaved Gains and losses from well-behaved

international lending;international lending;       Taxes on international lending; Taxes on international lending; International lending to developing countries; International lending to developing countries; Financial crisis: What can and does go wrong?Financial crisis: What can and does go wrong?       Resolving financial crises; Resolving financial crises; Reducing the frequency of financial crises.Reducing the frequency of financial crises.

International Financial Crises: International Financial Crises: Sources of What Goes Wrong Sources of What Goes Wrong

Overlending and overborrowingOverlending and overborrowingExogenous negative international shocksExogenous negative international shocksExcessive exposure to exchange rate riskExcessive exposure to exchange rate riskVolatile international short-term lendingVolatile international short-term lendingContagion Contagion

Combating Financial Crises Combating Financial Crises Resolving crises after they have occurredResolving crises after they have occurred

Rescue packagesRescue packages Debt restructuringDebt restructuring

Making crises less likely to occurMaking crises less likely to occur Sound macroeconomic policiesSound macroeconomic policies Timely and accurate data reportsTimely and accurate data reports Avoiding short-term borrowing denominated in foreign Avoiding short-term borrowing denominated in foreign

currenciescurrencies Better regulation and supervision of banksBetter regulation and supervision of banks ControversialControversial

• Exchange rate policyExchange rate policy• Role of IMFRole of IMF• Use of capital controls Use of capital controls