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November 1999 - Estimating the likely fiscal costs of future banking crises requires information about the size and composition of the banks' balance sheets and expert assessments about the accuracy of the accounting data and about certain short-term risks. There is constant demand for an estimate of the likely fiscal costs of future banking crises, but little precision can be expected in such an estimate. Honohan shows how information that is typically available to authorities could be used to get a general sense of the order of magnitude of the direct fiscal liability. What is required for such an estimate? Information about the size and composition of the banks' balance sheets; Expert assessments of the accuracy of the accounting data and of specific short-term risks to which the components are known to be subject. Honohan's method distinguishes between losses that have already crystallized and the changing risks for the immediate future. By including contingency planning for banking collapse in their fiscal calculations, authorities may risk destabilizing expectations or worsening the moral hazard in the system. But the risks of contingency planning generally outweigh the risks of sending confused signals. Insisting on ignorance is a poor way to protect against announcement errors that trigger panic. This paper - a product of Finance, Development Research Group - was produced for the Poverty Reduction and Economic Management Network thematic group studying the quality of fiscal adjustment. The author may be contacted at phonohan@worldbank.org.

Accounting --- Balance Sheet --- Banking Crises --- Banks and Banking Reform --- Budget --- Contingency Planning --- Conversion --- Debt Markets --- Depositors --- Emerging Markets --- Expenditure --- Expenditures --- Finance and Financial Sector Development --- Financial Instruments --- Financial Literacy --- Fiscal Authorities --- Fiscal Policy --- Future --- Liabilities --- Liability --- Monetary Authorities --- Moral Hazard --- Private Sector Development --- Revenue --- Tax --- Tax Rates

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January 2000 - No - there is no systematic association between interest rates and the outcome of speculative attacks. Drawing on evidence from a large sample of speculative attacks in industrial and developing countries, Kraay argues that high interest rates do not defend currencies against speculative attacks. In fact, there is a striking lack of any systematic association between interest rates and the outcome of speculative attacks. The lack of clear empirical evidence on the effects of high interest rates during speculative attacks mirrors the theoretical ambiguities on this issue. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study the causes and consequences of financial crises. The author may be contacted at akraay@worldbank.org.

Balance Of Payments --- Central Bank --- Currencies and Exchange Rates --- Debt Markets --- Economic Stabilization --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Fixed Exchange Rate --- Fixed Exchange Rates --- Fixed Nominal Exchange Rates --- Foreign Exchange --- Growth Rates --- Interest Rate Differentials --- Interest Rates --- International Capital Flows --- International Monetary Fund --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Monetary Authorities --- Monetary Authority --- Monetary Economics --- Monetary Policy --- Monetary Shocks --- Nominal Exchange Rate --- Private Sector Development --- Real Exchange Rate --- Real Interest Rates --- Tight Monetary Policy