World Bank2012-06-142012-06-142008-03https://hdl.handle.net/10986/8010This study begins from the premise that output and consumption are more volatile and prone to sharp contractions in developing than in high-income economies. This suggests that developing countries are somehow "underinsured" and may thus need to invest more in "country insurance" policies. To shed some light on this issue, the author begin by providing in the first chapter evidence of the excessive volatility faced by developing countries in general (and Latin American and Caribbean, LAC, countries in particular) and then discuss some of the welfare costs associated with such volatility. In second chapter, the author focus on the main trade-offs and on the strategic choices confronted by developing countries if they decide to increase their resilience to external shocks. Finally, in the third chapter, the author look at different policy options, focusing on how the international financial institutions (IFIs) in general and the World Bank in particular can help developing countries' reduce their vulnerability to external shocks. While excessive volatility in developing countries affects both government and the private sectors, this study limits its focus to the government sector. The private sector challenges will be addressed in future research.CC BY 3.0 IGOACCESS TO INSURANCEADVANCED ECONOMIESAGENCY PROBLEMASSET CLASSASSET MANAGEMENTASSET POSITIONASSET PRICESASSET-LIABILITY MANAGEMENTASYMMETRIC INFORMATIONBANK ASSETSBANKING SECTORBASIS POINTSBONDBOND ISSUEBOND PRICESBOND SPREADSBONDHOLDERSBORROWERBORROWING COSTSBUSINESS CYCLEBUSINESS CYCLESCAPITAL ACCOUNTCAPITAL FLOWSCAPITAL INFLOWSCAPITAL OUTFLOWCASH FLOWCASH FLOWSCATASTROPHE BONDCATASTROPHE BONDSCENTRAL BANKCOLLATERALCOMMODITYCOMMODITY PRICESCONTINGENT DEBTCONTINGENT LIABILITIESCORPORATE DEBTCOUNTRY RISKCOUPONCOUPONSCREDIBILITYCREDIT LINECREDIT LINESCREDIT RATINGCREDIT RATINGSCREDIT RECORDSCREDIT RISKCREDITWORTHINESSCURRENCYCURRENCY MISMATCHCURRENCY MISMATCHESCURRENCY RISKDATA AVAILABILITYDEBTDEBT BURDENDEBT CRISESDEBT ISSUANCEDEBT MANAGEMENTDEBT PAYMENTSDEBT RATIOSDEBT SERVICEDEBTORDEBTOR COUNTRIESDEBTORSDEBTSDEFAULTSDERIVATIVEDERIVATIVE MARKETDERIVATIVE MARKETSDERIVATIVESDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDEVELOPMENT BANKDISCOUNT RATEDOLLAR DEBTDOMESTIC BANKINGDOMESTIC CREDITDOMESTIC DEBTDOMESTIC FINANCIAL MARKETSDOMESTIC MARKETSECONOMIC DEVELOPMENTEMERGING ECONOMIESEMERGING ECONOMYEMERGING MARKETEMERGING MARKET BONDEMERGING MARKETSEXPORTERSEXPOSUREEXTERNAL DEBTFINANCIAL ASSETSFINANCIAL CONTAGIONFINANCIAL CONTRACTSFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL FLOWSFINANCIAL INNOVATIONFINANCIAL INSTITUTIONFINANCIAL INSTRUMENTSFINANCIAL MARKETSFINANCIAL SAVINGSFINANCIAL SHOCKFINANCIAL SHOCKSFISCAL POLICIESFLEXIBLE EXCHANGE RATEFOREIGN BANKSFOREIGN CURRENCIESFOREIGN CURRENCYGLOBAL BONDGLOBAL BOND INDEXGLOBAL MARKETSGOVERNMENT BONDGOVERNMENT BOND YIELDGOVERNMENT BONDSGOVERNMENT FINANCESGOVERNMENT POLICIESHEDGESHOLDINGHOLDINGSHUMAN CAPITALINCOME FLOWINCOME GROUPSINCOME INEQUALITYINCOME LEVELINCOME SHOCKINCOME SHOCKSINDEXED BONDINDEXED BONDSINEFFICIENT MARKETSINFLATIONINSTRUMENTINSURANCEINSURANCE POLICIESINSURANCE POLICYINSURANCE PREMIUMINSURANCE PREMIUMSINTEREST RATEINTEREST RATESINTERNATIONAL BANKSINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL CREDITINTERNATIONAL FINANCIAL INSTITUTIONSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL INTERESTINTERNATIONAL MARKETSINVESTINGISSUANCELENDERLENDER OF LAST RESORTLEVYLIABILITY COMPOSITIONLIMITED LIABILITYLIMITED LIABILITY COMPANYLIQUID ASSETSLIQUID MARKETLIQUIDATIONLIQUIDITYLIQUIDITY CRISESLIQUIDITY CRISISLIQUIDITY RISKLLCLOANLOCAL CURRENCIESLOCAL CURRENCYLOCAL FINANCIAL MARKETSLOCAL GOVERNMENTLOW-INCOME COUNTRIESMACROECONOMIC VOLATILITYMARKET ACCESSMARKET FAILURESMARKET VALUEMATURITYMONETARY FUNDMORAL HAZARDMULTILATERAL DEVELOPMENTNATURAL DISASTERNATURAL DISASTERSNEGATIVE INCOME SHOCKSNEGATIVE SHOCKNEGATIVE SHOCKSOIL PRICESOPEN ECONOMYOUTPUTOUTPUT LOSSOUTSIDE ASSISTANCEOUTSTANDING DEBTPORTFOLIOPRICE MOVEMENTSPRIVATE CAPITALPRIVATE DEBTPRIVATE INVESTMENTSPRIVATE MARKETSPUBLIC DEBTPUBLIC DEBT MANAGEMENTPUBLIC SPENDINGPUT OPTIONREAL EXCHANGE RATEREPAYMENTSREPORESERVERESERVESRETURNRISK AVERSIONRISK DIVERSIFICATIONRISK MANAGEMENTRISK POOLINGRISK PREMIUMSRISK-TAKING CAPACITYSAFETY NETSAFETY NETSSECONDARY TRADINGSECURITIESSHOCKS TO INCOMESHORT MATURITIESSHORT-TERM DEBTSMALL COUNTRIESSOLVENCYSOVEREIGN DEBTSOVEREIGN LIABILITIESSOVEREIGN RISKSTOCKSSWAPSWAPSTAXTRANSACTIONTRANSACTION COSTSTRANSPARENCYTREASURYTREASURY BILLSTURNOVERUNDERLYING ASSETWORLD DEVELOPMENT INDICATORSWorld Bank10.1596/8010