In this paper three possible reasons are examined for a sluggish inflation response to a hard currency peg. Models of overlapping wage contracts are analyzed and shown to generate little inertia. This contrasts with the effects of government credibility and the speed of private sector learning,...

This paper explains why sovereign issuers of reserve currencies do not use unexpected inflation to repudiate their foreign liabilities. Monetary restraint is exercised because of the fear that reserve users will switch to other currencies if an attempt is made to raise “excessive” revenue....

Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper...

The paper shows how excessive reporting, called ""crying wolf"", can dilute the information value of reports. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement. Banks monitor transactions and report suspicious activity to government...

This paper examines how public disclosure of banks’ risk exposure affects banks’ risk-taking incentives and assesses how the presence of informed depositors influences the soundness of the banking system. It finds that, when banks have complete control over the volatility of their loan...

This paper underscores the importance of the assessment of incentives of the main agents in a financial system as a key element in the analysis of financial system vulnerability and the surveillance over the financial system. We outline a diagnostic approach for the assessment of incentives....

This paper studies the impact of competition on the determination of interest rates and banks’ risk-taking behavior under different assumptions about deposit insurance and the dissemination of financial information. It finds that lower entry costs foster competition in deposit rate sand reduce...

During long periods of history, countries have pegged their currencies to an international standard (such as gold or the U.S. dollar), severely restricting their ability to create money and affect output, prices, or government revenue. Nevertheless, countries generally have maintained their own...