Reengineering the Volatility Machine: How the IMF Can Help Prevent Financial Crises

World Policy Journal

Volumn 20, Issue 3, 2003, Pages 52-58

  Pettis, Michael ^a  

^a NONE

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Indexed keywords

EID: 0344496195     PISSN: 07402775     EISSN: None     Source Type: Journal    
DOI: 10.1215/07402775-2003-4009     Document Type: Review

References (3)

1. Quoted in Paul Blustein, The Chastening (New York: PublicAffairs, 2001), p. 118.
2. For a more detailed discussion of how debt levels affect investment decisions, see Michael Pettis, The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (New York: Oxford University Press, 2001), pp. 99-102.
3. The way an economy reacts to shocks depends on how inverted or correlated the country's capital structure is. Correlated capital structures are ones in which financing costs and operating revenues are correlated, so that when revenues rise (fall), debt-servicing costs also rise (fall). Inverted capital structures have the opposite effect. While correlated structures are highly stable, inverted capital structures are not.