To understand the consequences of the presence of international safety nets on governments' incentives to undertake reforms, we model IFIs´ interventions as country insurance policies. We find that country insurance (especially when made contingent on negative external shocks) is more likely...

Using a generalized cross-spectral approach, we propose a model-free omnibus statistical procedure to check whether the direction of changes in an economic variable is predictable using the history of its past changes. A class of separate inference procedures are also given to gauge possible...

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...

The large wealth and consumption inequality in the U.S. is usually attributed to two market frictions: debt constraints and incomplete markets. Recent literature has argued that debt constraints are the critical friction while market incompleteness plays only a secondary role. We evaluate the...

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...

A government policy regarding the reduction of state shares in state-owned enterprises (SOE) triggered a crash in the Chinese stock market. The sus- tained depression even after policy adjustments constitutes a puzzle— the so called “state-share paradox.”The empirical evidence shows...

This paper presents both the time-series and cross-country evidence on the growth of global equity markets and attempts to shed some light on the sources of equity market growth. Using data on 33 countries, I find that development of financial intermediaries and openness to trade are positively...

When asset markets are incomplete there are almost always many Pareto improving policy interventions, provided there are multiple commodities and households. Remarkably, these interventions do not involve adding any new markets. Focusing on tax policy, I create a framework for proving the...

Despite the great success of the derivatives market, several concerns were expressed regarding the additional volatility stemming from program trading during the expiration of derivatives. This paper examines the impact of the expiration of the KOSPI 200 index derivatives on cash market of Korea...

A government policy regarding the reduction of state shares in state-owned enterprises (SOE) triggered a crash in the Chinese stock market. The sus- tained depression even after policy adjustments constitutes a puzzle— the so called “state-share paradox.”The empirical evidence shows...