By promising to intervene in vulnerable markets in the event of excessive financial volatility, the IMF, as the largest player, would reduce coordination problems among investors.

Opponents of central-bank intervention are right about one thing: monetary financing carries serious risks. In order to ensure that it is as safe and effective as possible, it must be used primarily in the event of self-fulfilling debt crises.

If a debt crisis results from government profligacy and mismanagement, rather than from a market failure, it is true that the central bank should not intervene.

Gita Gopinath Quotes