Heavy foreign exchange intervention by central banks of emerging markets have lead to sizeable expansions of their balance sheets in recent years?accumulating foreign assets and non-money domestic liabilities (the latter due to sterilization operations). With domestic liabilities being mostly of...

Highly favorable external conditions have helped Latin America strengthen its economic fundamentals over the last decade. But, has the region built enough buffers to guard itself from a weakening of the external environment? This paper addresses this question by developing a simple framework...

The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante...

The strong US policy response to the 2008-09 financial crisis raised concerns about its impact(spillovers) on other countries, with great focus on the monetary stimulus but little attention to fiscal policy, despite their combined deployment. Using a sign-restricted structural VAR approach, we...

Monetary policy entails demand augmenting and demand diverting effects, with its impact on the trade balance-and spillovers to other countries-depending on the relative magnitude of these opposing effects. Using US data, and a sign-restricted structural VAR identification strategy, we...

We study the process of external adjustment to large terms-of-trade level shifts-identified with a Markov-switching approach-for a large set of countries during the period 1960-2015. We find that adjustment to these shocks is relatively fast. Current accounts experience, on average, a...

The assessment of external positions and exchange rates is a key mandate of the IMF. This paperpresents the updated External Balance Assessment (EBA) framework-a key input in the conduct ofmultilaterally-consistent external sector assessments of 49 advanced and emerging marketeconomies-following...

We study exchange rate dynamics under cooperative and self-oriented policies in a two-country DSGE modelwith unconventional monetary and exchange rate policies. The cooperative solution features a large exchangerate adjustment that cushions the impact of negative shocks and a moderate use of...

We study the dynamic response of gross capital flows in emerging market economies to different global financial shocks, using a panel vector-autoregressive (PVAR) setting. Our focus lies primarily on the potentially stabilizing role played by domestic investors in offsetting the response of...

We study the use of foreign exchange (FX) intervention as an additional policy instrument in anenvironment with learning, where agents infer the central bank policy rules from its policy actions.Under full information, a central bank focused on stabilizing output and inflation can achievebetter...