The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even if market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe...

This paper discusses different empirical tests of public sector solvency and applies them to a sample of 18 OCED countries. Provided that the government solvency constraint need to be imposed, these tests develop from the idea of verifying whether the intertemporal budget constraint of the...

This paper analyzes optimal spending, tax and financial policies in models of endogenous growth where public spending is productive. We extend previous work in four directions. First, we analyze optimal policies when the government is allowed to borrow and lend, rather than being restricted to...

This paper investigates the relationship between international capital liberalization and exchange rate volatility. While the effects of a capital controls liberalization on the transaction volume in the foreign exchange market are theoretically unambiguous, the effects on the volatility of...

During recent episodes of financial turmoil some policy makers voiced concerns about aggressive, and possibly manipulative, practices by highly leveraged institutions in emerging markets. This paper addresses these concerns by reconsidering in detail, at both theoretical and empirical levels,...

The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even if market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe...

It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...

This paper studies the mechanism of international transmission of exchange rate shocks within a 3-country Center-Periphery model, providing a choice-theoretic framework for the policy analysis and empirical assessment of competitive devaluations. If relative prices and terms of trade exhibit...

This paper develops an interpretation of the Asian meltdown focused on moral hazard as the common source of overinvestment, excessive external borrowing, and current account deficits. To the extent that foreign creditors are willing to lend to domestic agents against future bail-out revenue from...

This paper uses a global macroeconomic simulation model to identify the factors that have contributed to global trade and financial imbalances in the 1980s. After investigating the properties of monetary and fiscal policies in the model, we examine whether the budgetary shifts in the OECD...