The deregulation of domestic financial markets and the capital account in developing countries has frequently been associated with financial turmoil and macro volatility. The book analyzes the experiences of several countries, drawing implications for building development-friendly domestic and...

This paper documents the expanding economic linkages between low-income countries (LICs) and a narrow group of ""Emerging Market leaders"" that have become major players in regional and global trade and financial flows. VAR models show that these linkages have increased the share of growth...

This paper presents a new theory of asset pricing intended to address why other developing country equity markets responded so strongly to the Mexican devaluation, while the world’s major stock markets were unmoved. This phenomenon can be explained if investors follow a two-step portfolio...

This volume deals with macroeconomic issues and their relation with economic growth. Frustrating GDP growth has been a lasting feature of Latin American economies since the 1980s. Analyzing the policy measures that were taken in a bid to avoid costly mistakes and recover economic growth, this...

This paper establishes that output volatility and the size of output drops have declined across all countries over the past three decades, but remain considerably higher in developing countries than in industrial countries. The paper employs a Bayesian latent dynamic factor model to decompose...

The aim of this paper is to evaluate the welfare gains from financial integration for developing and emerging market economies. To do so, we build a stochastic endogenous growth model for a small open economy that can (i) borrow from the rest of the world, (ii) invest in foreign assets, and...