This paper shows why regressing the realised rates of depreciation within the exchange rate band on a given information set and conditional on (ex-post) actual no-realignment (à la drift adjustment) still encounters a Peso Problem. Such a procedure generally gives inconsistent estimates. The...

We analyze firms’ investment behavior, differentiating firms according to the cash flow levels they experience during their lifecycles. We consequently consider the firm as the basic unit and not firm-year observations. Firms with persistent positive cash flow show higher investment-cash flow...

This paper analyzes central bank policies on monitoring banks in distress when liquidity provisions are conditional on performance and a bad shock occurs. A sequential game model is used to analyze two policies: one in which the central bank acts with discretion and the second in which the...

We model the exchange rate market for a country that initially follows a band policy, as a four-stage sequential game of complete information, where a stochastic shock is realized in the last stage. Given a fixed cost of leaving the band, we show that three types of equilibria may exist,...