The purpose of this paper is to explain the reluctance of developing countries to open up their capital market to foreigners, and the conditions inducing an emerging market economy to switch its policies. We consider an economy characterized initially by a one-sided openness to the capital...

The COVID-19 epidemic in emerging markets risks a combined health, economic, and debt crisis. We integrate a standard epidemiology model into a sovereign default model and study how default risk impacts the ability of these countries to respond to the epidemic. Lockdown policies are useful for...

We analyze the sovereign bond issuance data of eight major emerging markets (EMs) - Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey from 1970 to 2018. Our analysis suggests that (i) EM local currency bonds tend to be smaller in size, shorter in maturity, or lower in...

In this paper, we explore the link between stress in the domestic financial sector and the capital flight faced by countries in the 2008-9 global crisis. Both the timing of emergence of internal financial stress in developing economies, and the size of the peak-trough declines in the stock price...

We define the notion of a 'de facto fiscal space' of a country as the inverse of the tax-years it would take to repay the public debt. Specifically, we measure the outstanding public debt relative to the de facto tax base, where the latter measures the realized tax collection, averaged across...

This paper investigates the factors explaining exchange market pressures (EMP) and the hoarding and use of international reserves (IR) by emerging markets during the 2000s, as the Great Moderation turned to the 2008-9 global crisis and great recession. According to our results, both financial...

Newly developed long historical time series on public debt, along with modern data on external debts, allow a deeper analysis of the cycles underlying serial debt and banking crises. The evidence confirms a strong link between banking crises and sovereign default across the economic history of...

In this paper we study the degree to which Emerging Markets (EMs) adjusted to the global liquidity crisis by drawing down their international reserves (IR). Overall, we find a mixed and complex picture. Intriguingly, only about half of the EMs depleted their IR as part of the adjustment...

This paper discusses two pertinent issues dealing with the global liquidity crisis -- global prudential regulation reform, and reassessment of using international reserves in the crisis. We point out the paradox of prudential regulations -- while the identity of economic actors that benefited...

This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over...