This paper reviews the role of benchmark-driven investments in EM local bond markets. We provide an overview of how key EM bond benchmark indices are constructed, how they affect the behavior of investment funds, and what are the likely implications for capital flows and policy-making. Several...

The paper evaluates the key drivers of fiscal crises in a sample of countries from all three income groups—advanced, emerging, and low-income countries, using fiscal crisis data recently developed by the IMF’s Fiscal Affairs Department. The empirical study focuses on three questions: (1) How...

The COVID-19 pandemic and associated policy responses triggered a historically large wave of capital reallocation between markets and asset classes. Using high-frequency country-level data, this paper examines if and how the number of COVID cases, the stringency of the lockdown, and the fiscal...

Benchmark following and portfolio rebalancing effects have often been cited when trying to explain international financial contagion phenomena. Using a dataset containing the country allocation of individual dedicated emerging market equity funds, we assess the relevance of mean-variance...

This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand,...

We introduce unFEAR, Unsupervised Feature Extraction Clustering, to identify economic crisis regimes. Given labeled crisis and non-crisis episodes and the corresponding features values, unFEAR uses unsupervised representation learning and a novel mode contrastive autoencoder to group episodes...

This paper (i) provides evidence on the procyclical investment behavior of major institutional investors during the global financial crisis; (ii) identifies the main factors that could account for such behavior; (iii) discusses the implications of procyclical behavior; and (iv) proposes a...

This paper provides an overview of the strategic and operational issues as well as institutional challenges, related to the implementation of the Sovereign Asset and Liability Management (SALM) approach. Application of an SALM framework allows the authorities to identify and monitor sovereign...

We isolate a U.S. dollar currency premium by comparing corporate bonds issued in the dollar and the euro by firms o utside t he U .S. a nd e uro a rea. We make s everal empirical observations that dissect the perceived advantage of borrowing in the dollar. First, while the dollar dominates...

Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries' external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP's currency composition, we find that...