The paper develops a simple model of sovereign debt where default both through direct repudiation and through inflation are possible and give rise to (endogenous) constraints on the currency composition and the level of public debt. This set up allows to show that procyclicality of fiscal policy...

Over the past decades, workers' remittances have grown to become one of the largest sources of financial flows to developing countries, often dwarfing other widely-studied sources such as private capital and official aid flows. While it is undeniable that remittances have poverty-alleviating and...

Exchange rate reforms in developing countries have often aimed at floating the exchange rate in an attempt to unify the official and parallel markets for foreign exchange. This paper examines the anticipatory dynamics associated with such reforms. The analysis shows that if the future unified...

This paper investigates the impact of workers’ remittances on equilibrium real exchange rates (ERER) in recipient economies. Using a small open economy model, it shows that standard "Dutch Disease" results of appreciation are substantially weakened or even overturned depending on: degree...

Over the past two decades, most emerging market economies witnessed two key developments. A marked process of financial integration with the rest of the world, arguably turning these economies more vulnerable to global financial shocks; and an improvement of macroeconomic fundamentals, helping...