01892cas a2200253 a 4500 AALejournalIMF004020 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451863338 1018-5941 BD-DhAAL BD-DhAAL Mendoza, Enrique. Are Asset Price Guarantees Useful for Preventing Sudden Stops?A Quantitative Investigation of the Globalization Hazard-Moral Hazard Tradeoff / Enrique Mendoza, Ceyhun Bora Durdu. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (40 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students An implication of the "globalization hazard" hypothesis is that sudden stops could be prevented by offering foreign investors price guarantees on emerging markets assets. These guarantees create a tradeoff, however, because they weaken globalization hazard by creating international moral hazard. We study this tradeoff using an equilibrium asset-pricing model. Without guarantees, margin calls and trading costs cause Sudden Stops driven by Fisher's debt-deflation process. Price guarantees prevent this deflation by propping up foreign asset demand, but their effectiveness and welfare implications depend critically on the price elasticity of foreign demand and on making the guarantees contingent on debt levels. Mode of access: Internet Durdu, Ceyhun Bora. IMF Working Papers; Working Paper ; No. 2006/073 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/073/001.2006.issue-073-en.xml IMF e-Library