Monetary authorities in emerging markets are often reluctant to raise interest rates when dealing with credit booms driven by capital inflows, as they fear that an increase attracts even more capital and appreciates the currency. A number of countries therefore use reserve requirements as an...

A stable net external position requires that the trade balance responds negatively to changes in the net external position. If financial integration makes financing external imbalances less costly, we expect slower external adjustment in more integrated economies. The study estimates...

This paper investigates the sources of current account imbalances accumulated within the European Monetary Union before the Great Recession. First, it documents that starting in 1996, before the actual introduction of the euro, countries in the euro area periphery experienced increasing current...

Episodes of large capital inflows in small open economies are often associated with a shift of resources from the tradable to the non-tradable sector and sometimes lead to balance-of-payments crises. This paper builds a two-sector dynamic model to study the evolution of the sectoral structure...

Rapid credit growth in the EU new Member States, acceding and candidate countries has raised the issue of financial stability in the region. This rapid credit growth has been accompanied by the deterioration in the current account balance and the large-scale distribution of foreign currency...

The surge in capital inflows towards emerging countries after 2009 has revived the debate about capital controls. This paper analyzes some of the international implications of restrictions on capital inflows. Focusing on a sample of Latin-American countries, we use detailed balance of payments...

We study the extent to which uncertainty in advanced country macroeconomic policy spills over to emerging markets via portfolio bond and equity flows. We find that increases in US policy uncertainty significantly reduce portfolio bond and equity flows into EMEs. Conversely, increases in EU...

This paper shows how interbank market fragmentation disrupts monetary policy implementation. Fragmentation is defined as the situation where some banks are cut from the interbank loan market. The paper incorporates fragmentation in an otherwise standard theoretical model of monetary policy...

Reserve requirements are a prominent policy instrument in many emerging countries. The present study investigates the circumstances under which reserve requirements are an appropriate policy tool for price or financial stability. We consider a small open economy model with sticky prices,...

In this paper, we empirically examine the effect of inflation targeting on the exchange rate pass-through to prices in emerging countries. We use a panel VAR that allows us to use a large dataset on twenty-seven emerging countries (fifteen inflation targeters and twelve inflation nontargeters)....