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Mr. Robert P Flood

unanticipated component, then the SS will be accompanied by an increase in the real exchange rate (i.e., real devaluation). 3 Finally, the model is extended to incorporate money in a cash-in-advance fashion. Since money demand is positively correlated with aggregate demand, a collapse of the latter (discussed at the end of last paragraph) would bring about a drop in the demand for money. Thus, if the exchange rate is fixed, international reserves will fall precipitously, resembling a BOP crisis. The monetary economy is then employed to study optimal exchange rate policy

International Monetary Fund. Research Dept.

the Bank of Mexico; Nancy Birdsall, President of the Center for Global Development; Jeffrey Frankel, Professor of Economics at Harvard University; and Jeffrey Sachs, Professor of Economics at Columbia University. The conference agenda and brief descriptions of the papers follow. All the conference papers and the full text of the panel discussion are available at the IMF’s website at www.imf.org/external/pubs/ft/staffp/2002/00-00/arc.htm . Mundell-Fleming Lecture Explaining Sudden Stop, Growth Collapse and BOP Crisis: The Case of Distortionary Output Taxes

Swart R. Ghosh and Mr. Atish R. Ghosh
This paper examines the role of structural factors—governance and rule of law, corporate sector governance (creditor rights and shareholder rights), corporate financing structure—as well as macroeconomic variables in currency crises. Using a technique known as a binary recursive tree allows for interactions between the various explanatory variables. It is found that structural vulnerabilities play an important role in the occurrence of “deep” currency crises (those with a real GDP growth decline of at least 3 percentage points) and that there are complex interactions between these structural vulnerabilities and macroeconomic imbalances.