This paper examines the emergence of financial stability as a key policy objective. It discusses the underlying trends in the financial system, as well as the role of finance in relation to money, the real economy, and public policy. Financial stability is defined in terms of its ability to help...

This paper investigates the contagion from Russia to Brazil in late 1998 under two dimensions— players involved and the timing of events. The data does not seem to reflect a compensatory liquidation of assets story by international institutional investors. It does contribute, however, to the...

We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document, as expected, that at a point in time U.S. portfolios are tilted towards...

This paper reviews and draws lessons from the stabilization and reform program that Korea implemented in response to the 1997-98 crisis. The economy recovered quickly from the deep recession in 1998 and its vulnerability to a balance of payments crisis has been reduced sharply. Significant...

This paper compares the impact of shocks to U.S. interest rates and emerging market bond spreads on domestic interest rates and exchange rates across several emerging market economies with different exchange rate regimes. Consistent with conventional priors, the results indicate that interest...

Since recent debt restructurings that constitute credit events have been more frequent than outright defaults, sovereign bond prices may not collapse during distress. In this case, the likely high recovery values after restructuring suggest that the cost of credit-default-swap (CDS) contracts to...

Emerging market countries have enjoyed an exceptionally favorable economic environment throughout 2004, 2005, and early 2006. In particular, accommodative U.S. monetary policy in recent years has helped create an environment of low interest rates in international capital markets. However, if...

A review of the experience of five developing countries in reforming their financial systems illustrates the benefits and risks, and provides lessons on the factors which contribute to successful financial sector reforms. Financial sector reforms need to be supported by active monetary policy,...

This paper tests empirically the theoretical prediction that the country premium paid by emerging economies on sovereign debt increases with the amount of debt up to a certain critical level, above which the supply of foreign funds becomes fixed. The results confirm this theoretical prediction....

A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking "pure" country and industry factors are...