Do U Get White Mucus Before Youre Period Is Due

Last round for the international lender of last resort (or the paradox of early warning)

Ayer me tocó exponer otra vez mis ideas sobre el diseño de un prestamista de última instancia internacional, que provea dólares the economies (emerging and others) who suffer a crisis in global foreign output (written in his latest incarnation, these ideas are here ).


This time the presentation was for the IMF working group spent more than two years to improve the supply of the body, responsible for the creation of many acronyms: FCL (Flexible Credit Line), HAPA (a Stand By with conditionality lite and ambiguous connotations name in Castilian), PCL (a lite HAPA) and the unborn GSM (Global Stabilization Mechanism), which proposes to give in times of crisis automatic access to the liquidity of the Fund to a group of countries systemic (Latin America, Brazil and Mexico)-a substitute for the always uncertain help of the Federal Reserve.

Of all these inventions, the GSM is undoubtedly the most innovative, simply because it is the only one that provides one-stop access to liquidity without a formal solicitd to leave the country at the mercy of the IMF Board awkward and uncertain than last crisis emerging solvents mostly ignoring the roots prevented bids Fund.

Predictably, it was the automatic access-that is, the reluctance of the Board of the IMF to its members to receive money without going through the examination table, that ball the proposal. The funny thing is that in this case was wrongly called BRICs those who put the stick in the wheel.

The GSM provides automatic access in times of crisis. For this access is predictable (for the markets will anticipate and not charged against the assets of the beneficiary country) is needed then a trigger simple and transparent (a crisis determination mechanisms which in turn activate the GSM and access these countries). However, this requires the IMF to design a thermometer that in times of financial stress, announce to everyone that entered global crisis, possibly, many think, worsening deepening panic and run.

The dilemma is not unlike the paradox of early warning models and the dilemma of IMF financial monitor, I tend to lose some time in my classes. In short, if we knew that the model is 100% accurate alert, the alert would not be early because when delivering the signal around the world would be anticipating the inevitable crisis. Similarly, if the IMF detects that a country (eg Thailand in 1997) is heading towards a crisis, a crisis may trigger notice, leaving the IMF as the main culprit (especially if there was any chance that the crisis is not materialize, the so-called type II statistical error).

In the case of GSM, the countries involved seem to have chosen to recognize the crisis when it is obvious and the advert can not add more information. That is, recognizing too late, when financial assistance operates literally as a safety net, which cushions the blow, but does not prevent (in this case, avoidable) falling into the void.

The last round around this issue is likely this summer, with a view to launching a proposal at the next annual meeting of the Fund. But without emerging on the table, the chances are not good.