This paper presents a generalized two-step maximum likelihood estimation method for partially identified vector autoregressive models. We suggest a likelihood ratio test for over-identification in a sub-system and derive the asymptotics for impulse responses and forecast-error variance...

Students of politics are familiar with two common forms of influence exercised by special interests over politicians: the provision of financial support to favored candidates during election campaigns, and the application of lobbying power when dealing with elected politicians. However, in...

In recent years, there has been much debate on whether or not countries in a region should adopt a common currency. One of the criteria for assessing the suitability of forming a currency union is whether there is a sufficient risk-sharing mechanism in operation. Although adopting a common...

Are lending contracts between international financial institutions (IFIs) and sovereign borrowers optimal? To address this question this paper builds on two ideas. First, the prospect of future debt relief can make it profitable for an IFI to continue lending even if lending contracts are...

This paper examines whether recent international policy initiatives to facilitate financial rescues in emerging market countries have influenced debtors' incentives to access official sector resources. The paper highlights a country's systemic importance as a key characteristic that drives...

This paper examines how the choice of exchange rate regime can signal financial rectitude and, in so doing, influcence a country's ability to borrow internationally in domestic currency. We develop a model in which the constant probability of a 'type change' creates incentives for disciplined...

This paper explores the case of a sovereign indebted country facing a choice of economic policy today that will determine the country's ability to continue its debt servicing in the future. If the sovereign undertakes an unsound economic policy it will repudiate its debt with certainty;...

Since the collapse of the Bretton Woods system in the early 1970s, the choice of the exchange rate regime has been the subject of a lively debate in international finance. In this study, we investigate the determinants of three exchange rate regimes (fixed, flexible and intermediate). Our...

We present the first firm-level analysis of stock market liberalization on investment. In the year that an emerging economy liberalizes, the growth rate of its typical firm^Òs capital stock exceeds the pre-liberalization mean by 4.1 percentage points. In each of the next three years the average...