Fashions are hard to resist, and it is now fashionable in much of the North to rely on a fiscal engine of growth. As for emerging markets, however, boosting spending at a time in which revenues are contracting or, in many cases, collapsing for an uncertain period of time is an more complicated...

The standard pattern: capital flows into the new “hot” nation, but then stop or reverses forcing painful adjustment. This column presents research based on such episodes from 181 nations during 1980-2007 and for a subset of 66 nations for the 1960-2007 period. If the pattern of the past few...

We highlight in this note how an application of a similar estimation approach as ours to Colombian data for a more recent period following financial and capital account liberalization may find that the money supply is "endogenous" (i.e. demand-determined as long as the exchange rate is heavily...

Financial crises are historically associated with the “4 deadly D’s”: Sharp economic downturns follow banking crises; with government revenues dragged down, fiscal deficits worsen; deficits lead to debt; as debt piles up rating downgrades follow. For the most fortunate countries, the...

This paper has addressed the following questions: Do sovereign credit ratings systematically help predict currency and banking crises? If not, why not? What needs to change? What is the behavior of credit ratings following the crises? Are there important differences in the behavior of credit...

Both theory and the empirical evidence for a broad range of countries have identified a negative relationship between domestic and foreign saving. Still, based on the experience of the 1990s, a popular view has emerged that domestic and foreign saving are positively related in Asia and...

Comment: Michael Dooley and Inseok Shin make a compelling case that the Korean financial crisis of 1997 was not the consequence of a misaligned exchange rate and external imbalance, nor was it the classic first-generation credit-financed fiscal deficit stressed by Krugman (1979). The authors...

Sovereign credit ratings play an important part in determining countries’ access to international capital markets and the terms of that access. In principle, there is no reason to expect that sovereign credit ratings should systematically predict currency crises. In practice, however, in...

Given all the ambiguities about the outcomes of the financial liberalization process, it is relevant to ask what the systematic, cross-country evidence reveals on several questions, including: What happens to key macroeconomic and variables following domestic and external financial...

With many emerging market currencies tied to the U.S. dollar either implicitly or explicitly, movements in the exchange values of the currencies of major countries have the potential to influence the competitive position of many developing countries. According to some analysts, establishing...