Africa lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining...

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is...

Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. A devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a significant...

The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow...

The developing economies of the Asia Pacific Economic Cooperation (APEC) have been the recipients of a considerable volume of capital inflows in the 1990s. Given the increased integration of capital markets, it is not surprising that monetary control became more difficult for many developing...

The characteristics of recent capital inflows into Latin America are discussed. It is argued that these inflows are partly explained by conditions outside the region, like recession in the United States and lower international interest rates. This suggests the possibility that a reversal of...

The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the...

Traditional specifications of money demand have been commonly plagued by persistent overprediction, implausible parameter estimates, and highly autocorrelated errors. This paper argues that some of those problems stem from the failure to account for the impact of financial innovation. We...

The impact of changes in real interest rates on saving and growth is a central issue in development economics. According to one familiar view, a financial liberalization program which increases real interest rates should encourage saving, thereby boosting investment and growth. While such...