We consider how fear of model misspecification on the part of the planner and/or the households affects welfare gains from optimal macroprudential taxes in an economy with occasionally binding collateral constraints as in Bianchi (2011). On the one hand, there exist welfare gains from...

In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which...

Recent financial crises including the ongoing one caused by the COVID-19 pandemic have consistently drawn attention to the need to strengthen the quality of public debt management in emerging markets and developing countries. Deeper and more efficient domestic government debt markets-being, a...

We study the optimal management of capital flows in a small open economy model with financial frictions and multiple policy instruments. The paper reports two main findings. First, both foreign exchange intervention (FXI) and macroprudential polices are tools complementary to the monetary policy...

This paper studies the relationship between banks' holdings of domestic sovereign securities and credit growth to the private sector in emerging market and developing economies. Higher banks' holdings of government debt are associated with a lower credit growth to the private sector and with a...

This paper analyzes the experiences of emerging market economies (EMEs) that have liberalized capital flows over the past 15 years with respect to macroeconomic performance and risks to financial stability. The results of the panel data regressions indicate that greater openness to capital flows...

We reassess the connection between capital account openness and capital flows in an empirical framework that is grounded in theory and makes use of previously unexplored variation in the data. We demonstrate how our theory-consistent regressions may overcome some ubiquitous measurement problems...

The degree of an economy's monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization--measured by the ratio of broad money to nominal GDP--...

The resumption of capital flows to emerging market economies since mid 2009 has posed two sets of interrelated challenges for policymakers: (i) to prevent capital flows from exacerbating overheating pressures and consequent inflation, and (ii) to minimize the risk that prolonged periods of easy...

The study documents evidence of a ""quality effect"" of financial liberalization on allocative efficiency, which is measured by the dispersion in Tobin''s Q across firms. Based on a simple model, the authors predict that financial liberalization, by equalizing access to credit, reduces the...