Debtor countries need to manage their external relations to prevent crises and find rapid resolution to those that occur, which motivates this long exegesis of official doctrine and practices by private creditors. It would be alarming to invoke crises in other countries, but debtor countries do have the risk of a sudden stop of external capital flows, or reversal of flows, which actually happened in Mexico in 1994–95, Argentina currently and in 1994–95, Asia 1997–98 and Russia, Brazil and LTCM 1998. Private creditors and investors must engage in due diligence when providing credit to countries, analyzing carefully vulnerabilities and their probable impact on the value of their assets.
KeywordsCentral Bank Financial Institution Moral Hazard Inflation Target Sudden Stop
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