The recent wave of financial crises has fueled the debate on the effect of IFIs intervention on governments' incentives to undertake reforms. In this paper we treat this intervention more generally as a country insurance contract, and examine its implications in a stylized set-up. More...

We analyze optimal ï¬scal,monetary and exchange rate policy in a simple small open econonomy model with price setting frictions.We perform our analysis in the tradition of optimal dynamic Ramsey problems.We characterize optimal allocations and the government policies that implement the optimal...

The purchasing power parity (PPP) hypothesis has attracted a lot of attention from academics and policy-makers particularly, during the recent float. Most previous studies used data from the developed world. This study examines the validity of the PPP hypothesis using data during the recent...

I construct a micro-model to show that a currency crisis can spread from one country to another even when these countries are unrelated in terms of economic fundamentals and there is no capital linkage across countries through a common lender or an interbank market. The key to explaining...

Using the tick-by-tick yen/dollar exchange rate, this paper examines the effect of Japanese banking crisis in late 1997 on the foreign exchange market. By high-frequency methodology, GARCH estimation and variance-ratio tests, the existence of a structural break in the foreign exchange market at...

This paper studies the implications of the presence of a large speculator like George Soros during a contagious currency crisis. The model proposes a new contagion channel and shows how a currency crisis can spread from one country to another even when these countries are totally unrelated in...

ABSTRACT This study re-examines the exchange rate-monetary fundamentals link with in a panel data framework. Pure time series and pooled time series-based tests fail to find empirical support for monetary exchange rate models (Sarantis (1994) and Groen (2000)). Using recently developed Panel...

This paper presents a model of exchange rate determination in which the forward premium anomaly emerges as the result of unanticipated central bank interventions in the foreign exchange market. Deviations from uncovered interest parity (UIP) therefore represent neither unexploited profit...

This paper analyses the impact of exchange rate regimes on real exchange rates, as defined by the relative price of nontradables to tradables in Argentina, Brazil, Chile (ABC) and Mexico from 1990 to 2002. As identified by the empirical literature, the real exchange rate is determined in the...

Large capital inflows and repeated balance of payments crises (BOPC) associated with their sudden reversal have characterized the emerging market economies during the 90's. Sterilized intervention has been the most common response to capital inflows. This paper links the sterilization efforts...