We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...

We study the mechanisms through which the adoption of the Euro delayed, rather than advanced, economic reforms in the Euro zone periphery and led to the deterioration of important institutions in these countries. We show that the abandonment of the reform process and the institutional...

In this we specify and jointly estimate supply, demand and price equations for four aggregate commodity groups: food, beverages, agricultural raw materials and metals. This simple structural model allows us, for each group of commodities, to incorporate stock data for the first time, and to...

We analyse the effects of insider trading on real investment and welfare, and the consequences of different regulatory policies: a disclose-or-abstain rule, ‘fair’ disclosure, laissez-faire and forbidding insider trades based on ‘precise’ information. We perform the analysis in a model...

We ask when currency carry trades are associated with destabilizing dynamics in the foreign exchange market, and investigate the role of monetary policy rules in setting of such dynamics. In a model where the exchange rate has a long-term fundamental anchor, we find that carry trades can be...

This is an exercise in the positive economics of alternative monetary regimes. The behaviour of output and prices is compared using a stochastic specification which allows asymptotic variances to be obtained without difficulty. Free floating of exchange rates together with national money supply...

In this paper we analyze issues of symmetry and asymmetry in the workings of the EMS. We first measure how interest rates react to speculative disturbances. We find that despite the fact that speculative shocks have usually forced the offshore interest rates of the weak currencies to increase by...