This paper provides a set of stylised facts on the mechanisms through which banking and sovereign distress feed into each other, using a large sample of emerging economies over three decades. We first define “twin crises” as events where banking crises and sovereign defaults combine, and...

This paper studies the effects of delegating control of sovereign debt issuance to an independent authority in a monetary union where public spending decisions are decentralized. The model assumes that no policy makers are capable of commitment to a rule. However, consistent with Rogoff (1985)...

The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements...

This paper studies how financial innovation in sovereign debt markets can increase a country’s level of private investment and welfare. I propose a model where public debt has a liquidity purpose for the domestic private sector and is demanded as a saving vehicle by more patient international...

Sovereign debt restructurings do constitute a recurrent phenomenon in emerging and developing economies. Consequently, the international community has repeatedly explored options to increase the predictability and orderliness of debt workouts, of which the debate on the Sovereign Debt...

This paper analyzes the role played by the IMF in eight recent sovereign debt restructurings from a comparative perspective: Argentina (2001-2005), the Dominican Republic (2004-2005), Ecuador (1999-2000), Pakistan (1998-2001), the Russian Federation (1998-2001), Serbia (2000-2004), Ukraine...

In periods of market stress, portfolio reallocations in bond markets reflect both safety and liquidity concerns. Using sovereign and national agency bonds, we construct indicators of liquidity premia in major euro area bond markets; we document the weakening of the correlation between core and...

In this paper we compare the determinants of loan dollarisation in two emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, by means of a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign...

Many central banks actively intervene in the foreign exchange (forex) market, although there is no consensus on its impact on the exchange rate level and volatility. We analyze the effects of daily forex interventions in four Latin American countries with inflation targets — namely, Chile,...

We propose a fundamentals-based econometric model for the weekly changes in the euro-dollar rate with the distinctive feature of mixing economic variables quoted at different frequencies. The model obtains good in-sample fit and, more importantly, encouraging outof-sample forecasting results at...