We revisit the dramatic failure of monetary models in explaining exchange rate movements. Using the information content from 98 countries, we find strong evidence for cointegration between nominal exchange rates and monetary fundamentals. We also find fundamentalsbased models very successful in...

In recent years there has been substantial theoretical and empirical work on the role that financial markets play in fostering economic growth and development. This paper provides a selective review of the literature, as well as new empirical evidence on the relationship between financial...

We propose using a Bayesian time-varying coefficient model estimated with Markov chain-Monte Carlo methods to measure contagion empirically. The proposed measure works in the joint presence of heteroskedasticity and omitted variables and does not require knowledge of the timing of the crisis. It...

This paper examines the effects of IMF financial assistance on economic governance in developing countries, based on panel data analyses of perceived governance indicators. It uses a two-stage approach to address possible endogeneity issues. The results show that successful implementation of IMF...

Trade theories covering Preferential Trade Agreements (PTAs) are as diverse as the literature in search of their empirical support. To account for the model uncertainty that surrounds the validity of the competing PTA theories, we introduce Bayesian Model Averaging (BMA) to the PTA literature....

This paper analyzes the importance of developing market-enhancing institutions for restoring economic growth in transition economies during 1991–98. The paper’s main finding is that the development of an institutional framework has indeed a significant positive impact on growth, but that...

This paper investigates the impact of public capital on private sector output by testing and estimating an aggregate production function for the U.S. economy over the postwar period augmented to include the stock of public capital as an additional factor input. We use patent applications to...

This paper derives risk indicators for the major Chilean banks based on contingent claims analysis, an extension of Black-Scholes-Merton option-pricing theory. These risk indicators are clearly tied to macroeconomic and financial developments in Chile and outside, but bank responses are highly...

This paper uses a Merton-type estimate of the probability of default (PoD) for the main banks in a sample of Organization for Economic Cooperation and Development and middle-income countries as a proxy for the fragility of their banking systems. Based on theory and stylized facts, the paper...