Is the US too big to fail?

Reinhart, Carmen and Reinhart, Vincent (2008): Is the US too big to fail? Published in: VoxEU-CEPR (17 November 2008): pp. 1-9.

Abstract

Why are investors rushing to purchase US government securities when the US is the epicentre of the financial crisis? This column attributes the paradox to key emerging market economies’ exchange practices, which require reserves most often invested in US government securities. America’s exorbitant privilege comes with a cost and a responsibility that US policy makers should bear in mind as they handle the crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial crisis, exchange rates, reserves,government
• Subjects: F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F3 - International Finance; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

References

Michael P. Dooley , David Folkerts-Landau, Peter Garber, “The revived Bretton Woods system,” International Journal of Finance & Economics Volume 9 Issue 4, 2004, pp. 307 – 313.

Reinhart, Carmen and Vincent Reinhart “Capital Flow Bonanzas: Past and Present,” (with Vincent R. Reinhart) in Jeffrey Frankel and Francesco Giavazzi (eds.) NBER International Seminar in Macroeconomics 2008, (Chicago: Chicago University Press for NBER, forthcoming 2008a).

Reinhart, Carmen and Vincent Reinhart, “From capital flow bonanza to financial crash,” VoxEU (2008b).

Reinhart, Carmen and Kenneth Rogoff, “The Forgotten History of Domestic Debt,” NBER Working Paper 13946, April 2008.