When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor when. Eventually, in 2005 after a delay of more than three years, a supermajority of creditors...

Financial globalization has seen the emergence of a new monetary standard based on inflation targeting. At the same time the most financially advanced economies moved away from exchange rate targeting which also characterized the previous era of globalization - the era of the Classical Gold...

Both empirical evidence and theoretical discussion have long emphasized the impact of `news' on exchange rates. In most exchange rate models, the exchange rate acts as an asset price, and as such responds to news about future returns on assets. But the exchange rate also plays a role in...

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is...

A considerable literature has examined the causes, consequences, and policy responses to surges in international capital flows. A related strand of papers has attempted to catalog current account reversals and capital account "sudden stops." This paper offers an encompassing approach with an...

Motivated the European debt crisis, we construct a tractable theory of sovereign debt and structural reforms under limited commitment. The government of a sovereign country which has fallen into a recession of an uncertain duration issues one-period debt and can renege on its obligations by...

The high level of trade and financial integration reached by Europe both today and under the late 19th century gold standard suggests that important lessons can be learned by looking at past record to inform current issues. In this article, we draw a fresh picture of the European gold standard,...

The provision of liquidity by international institutions such as the IMF to countries experiencing balance of payment problems could prevent liquidity runs but could also cause moral hazard distortions: expecting to be bailed out by the IMF, debtor countries would have weak incentives to...

The international financial system has been the subject of much debate following the financial crises of the 1990s. While many reforms have been proposed for and implemented by mostly developing countries, few changes have been made to the international financial system itself. Fundamentally,...

The Paper sets out the principles that should underlie sovereign debt restructuring. It argues for a rules-based approach to achieve private sector involvement in restructuring. The rules must operate, however, in the context of an appropriate institutional framework with appropriate incentives....