In this paper we ask the empirical question are bond covenants priced? Consistent with the Costly Contracting Hypothesis (CCH) developed by Smith and Warner (1979), we find that they are. We document a negative relation between the promised yield on corporate debt issues and the presence of...

This paper investigates the empirical relevance of a new framework for monetary policy analysis in which the decision makers are allowed to weight differently positive and negative deviations of inflation and output from the target values. Reduced-form and structural estimates of the central...

Based on a simple open economy framework, this analysis rationalizes the existence of “fear of floatingâ€-type responses and uncovers some important implications about to role of pass-through effects and contractionary depreciations. By examining how the optimal monetary response varies...

This paper analyzes price formation and dynamics according to the industry structure. It divides manufacturing industries of Mexico into two groups: perfectly and imperfectly competitive. The results show that imperfectly competitive industries predominate. Then this classification is used to...

In recent times, economists concur that economy's response to monetary policy is somewhat weaker then they were in the past. However, the cause of such change remains an open issue. One plausible reason for this change could be attributed to the financial reform processes that have brought...

I explore alternative central bank credit policies in a theoretical model where (i) money is necessary as a means of payment, (ii) there is a shortage of liquidity that a central bank addresses through the extension of credit, (iii) money is necessary to repay debts, and (iv) the incentives to...

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...

This paper surveys the postwar evolution of Bank of Japan (BOJ) monetary policy. Using both qualitative and quantitative data, we describe the changes in the money supply process in response to changing institutional constraints. We focus on the transition from quantitative to qualitative...

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...

This paper characterizes, empirically, the conduct of monetary policy in a small open economy. In particular, using as a case study the Chilean inflation targeting experience, we assess the role of the exchange rate in the determination of the interest rate. We conclude that Chile has adopted...