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Is the US too big to fail?

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  • Reinhart, Carmen
  • Reinhart, Vincent

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.

Suggested Citation

  • Reinhart, Carmen & Reinhart, Vincent, 2008. "Is the US too big to fail?," MPRA Paper 12976, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12976
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    File URL: https://mpra.ub.uni-muenchen.de/12976/1/MPRA_paper_12976.pdf
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Vincent R. Reinhart, 2009. "Capital Flow Bonanzas: An Encompassing View of the Past and Present," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 5(1), pages 9-62.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "The Forgotten History of Domestic Debt," Economic Journal, Royal Economic Society, vol. 121(552), pages 319-350, May.
    3. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
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    Cited by:

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "A Decade of Debt," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 4, pages 97-135, Central Bank of Chile.
    2. Carmen M. Reinhart & Vincent R. Reinhart, 2009. "When the North Last Headed South: Revisiting the 1930s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 251-276.
    3. Renée Fry & Cody Yu-Ling Hsiao & Chrismin Tang, 2011. "Actually This Time Is Different," CAMA Working Papers 2011-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Shaffer, Sherrill, 2012. "Bank failure risk: Different now?," Economics Letters, Elsevier, vol. 116(3), pages 613-616.
    5. Reinhart, Carmen, 2009. "Financial crash, commodity prices and global imbalances: A comment," MPRA Paper 13679, University Library of Munich, Germany.

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    More about this item

    Keywords

    financial crisis; exchange rates; reserves; government;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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