The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...

This paper incorporates a global bank into a two-country business cycle model. The bank collects deposits from households and makes loans to entrepreneurs, in both countries. It has to finance a fraction of loans using equity. We investigate how such a bank capital requirement affects the...

Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding...

We use changes in Brazil’s tax on capital inflows from 2006 to 2011 to test for direct portfolio effects and externalities from capital controls on investor portfolios. The analysis is structured based on information from investor interviews. We find that an increase in Brazil’s tax on...

The size and economic relevance of Europe may imply a new role for the EURO in the international financial markets. But will the EURO compete with the $US and the Yen for a place in the basket of international currencies? Will that induce a bipolar or indeed tri-polar system, and with what...

*The European Union will enter Stage Three of Economic and Monetary Union (EMU) in 1999. The development of euro financial markets and thickness externalities in the use of the euro as means of payment will be the major factors determining the importance of the euro as an international currency....

Three of the most important recent facts in global macroeconomics - the sustained rise in the US current account deficit, the stubborn decline in long run real rates, and the rise in the share of US assets in global portfolio - appear as anomalies from the perspective of conventional wisdom and...

This paper analyses whether sovereign default episodes can be seen as contingencies of optimal international lending contracts. The model considers a small open economy with capital accumulation and without commitment to repay debt. Taking first order approximations of Bellman equations, I...

The use of different currencies in the invoicing of international trade transactions plays a major role in the international transmission of economic fluctuations. Existing studies argue that an exporter’s invoicing choice reflects structural aspects of her industry, such as market share and...

This paper puts recent theoretical developments in the literature on currency crises in perspective by comparing two theoretical approaches, one based on the speculative attack model of Krugman-Flood-Garber and the other approach, which evolved following the 1992-93 crisis of the European...