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This paper explores the implications of precautionary saving and life cycle behavior for business cycle fluctuations. Existing heterogenous agent models of the business cycle, with labor income uncertainty and incomplete markets, yield aggregate quantitative predictions that are almost...

During the booms that invariably precede crises in emerging economies, policy makers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is sterilization --essentially a swap of international reserves for public bonds. However, there is...

Latin American economies are exposed to ubstantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden financial distress. In this paper we explore ways of overcoming external vulnerability drawing lessons from a detailed comparison of the...