Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as 'hysteresis,' argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and...

Credibility and financing problems are important reasons why countries may seek to involve external institutions in the design and implementation of stabilization programs. In particular, governments may rely on external institutions to ‘enforce’ programs that would otherwise lack...

This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment....

High levels of economic policy uncertainty in various parts of the world revamped the de- bate about its impact on economic activity. With increasingly stronger economic, financial, and political ties among countries, economic agents have more reasons to be vigilant of for- eign economic policy....

The G-20 Data Gaps Initiative (DGI), which aimed at addressing the information needs that were revealed by the 2007/2008 global financial crisis, concluded its first phase and started a second phase (DGI-2) with the endorsement of G-20 Finance Ministers and Central Bank Governors in September...

This paper explores how monetary policy affects the real economy and its efficacy in promoting financial stability in a large low income country. This paper shows that monetary policy modestly impacts real economic activity and inflation via the bank lending and financial accelerator channels....

In distilling a vast literature spanning the rational---irrational divide, this paper offers reflections on why asset bubbles continue to threaten economic stability despite financial markets becoming more informationally-efficient, more complete, and more heavily influenced by sophisticated...

Comparing the performances of the Austral, Cruzado and Sheqel programs shows that the latent suggestion that a “heterodox” stabilization program can be implemented without tight fiscal discipline to support a restrictive monetary policy, though welcome in the politicial arena, is...

This paper discusses stabilization policy in the presence of bands for the exchange rate. The bands are modelled in a probabilistic sense: monetary policy has to be such as to keep the probability, that the exchange rate stays within the bands, above a certain threshold. In contrast to other...