This paper investigates possible drivers of volatility in the South African rand since the onset of the global financial crisis. We assess the role played by local and international economic surprises, commodity price volatility, global market risk perceptions, and local political uncertainty....

External headwinds, together with domestic vulnerabilities, have loomed over the prospects of emerging markets in recent years. We propose an empirical toolbox to quantify the impact of external macro-financial shocks on domestic economies in parsimonious way. Our model is a Bayesian VAR...

In recent years, portfolio flows to emerging markets have become increasingly large and volatile. Using weekly portfolio fund flows data, the paper finds that their short-run dynamics are driven mostly by global “push” factors. To what extent do these cross-border flows and global risk...

The yen is an important barometer for the Japanese economy. Depreciations are typically associated with favorable economic developments such as increased corporate profits, rising equity prices, and upward pressure on domestic consumer prices. On the other hand, large and sharp appreciations run...

The global financial crisis was a stark reminder of the importance of cross-country linkages in the global economy. We document growth synchronization across a diverse group of 185 countries covering 7 regions, and pay particular attention to the period around the global financial crisis. A...

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches-liquidity tranche and investment tranche-especially for those with adequate reserves. Incorporating reserve tranching, we have developed in...

We stress test the global economy to extreme climate change-related shocks on large and interconnected economies. Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies’ external financing needs-at-risk due to...

This paper develops a new approach for exploring the effectiveness of foreign currency intervention, focusing on real exchange cycles. Using band spectrum regression methods, it examines the role of macroeconomic fundamentals in determining the equilibrium real exchange rate at short-, medium-,...

This paper presents an empirical measure of disinflation credibility and discusses its evolution in Turkey since the 2001 crisis. The results indicate that credibility has improved markedly over this period, boding well for the future of disinflation in Turkey

We analyze the causes of the apparent bias towards optimism in growth forecasts underpinning the design of IMF-supported programs, which has been documented in the literature. We find that financial variables observable to forecasters are strong predictors of growth forecast errors. The greater...