The current account imbalances that are at the heart of the European sovereign debt crisis are often attributed to differences in price competitiveness. However, recent research suggests that domestic demand booms related to the financial cycle may have been more important. As this would have...

We explore the role of financial openness - capital account openness and gross capital inflows - and a newly constructed gravity-based contagion index to assess the importance of these factors in the run-up to currency crises. Using a quarterly data set of 46 advanced and emerging market...

Mullainathan and Shleifer (2002) argue that there are two types of media bias. One bias, called ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, referred to as spin, reflects the outlet's attempt to simply create a memorable story....

This paper estimates the wealth effect on consumption of both equity and housing wealth, Using data across 16 industrial countries differentiated by type of financial system and examining trends in these wealth effects over time. The three main conclusions are found and their policy implications...

This paper empirically examines the impact of capital flows on credit growth, credit excesses and banking crises using quarterly panel data from 43 advanced (AEs) and emerging market economies (EMEs). Regressions show that gross capital inflows precede credit growth and credit excesses. Both...

Sovereign default is the switching state between successful and unsuccessful Fund catalysis. We find the IMF to be effective in mobilising private capital flows to middle-income countries that participate in a Fund program, but do not restructure their debt. A debt restructuring is a clear...

This paper investigates the effect of the external wealth position of the Netherlands on the Dutch trade balance. Contrary to intuition which allows net creditors to run a trade deficit, the Netherlands has over a period of years be running trade surpluses. To explain this paradox, not unique to...

We show that, complementary to trade and financial linkages, the strength of the banking sector helps explain the transmission of currency crises. Specifically, we demonstrate that the Mexican, Thai, and Russian crises predominantly spread to countries with weaknesses in their banking sectors....

This paper is part of the Kobe Research Project and documents the Dutch and Thai experiences regarding exchange rate policy, capital controls, and developments in the banking sector. In view of these experiences, it seeks to identify requirements for successful currency regimes, in particular...

The EU accession countries have made remarkable progress in developing their financial sectors. Nevertheless, potential risks to banking sector stability remain. We take stock of these risks, with a focus on the challenges posed by the EU accession process. Important potential risks we identify...