Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates which in turn make the debt problems more severe. We analyze the recent experience of advanced economies using both econometric methods and case studies...

In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves. These "unconventional" policies continued during the pandemic, so that by 2022 central banks' balance sheets had grown up to ten-fold. As a result of rapidly...

This paper uses an asymmetric information framework to understand the causes of the recent financial crisis in Korea. It shows that the Korean data is consistent with this explanation of the crisis. It then draws on this analysis to discuss several lessons that can help guide Korean policymakers...

This paper outlines a set of financial policies that can help make financial crises less likely in emerging market countries. To justify these policies, the paper first explains what a financial crisis is, the factors that promote a financial crisis and the dynamics of a financial crisis. It...

The paper examines possible monetary policy strategies for Latin America that may help lock-in the gains in the fight against inflation attained by the region during the 1990s. We start by calling for a refocus of the debate about the conduct of monetary policy away from thinking that it is...

This paper discusses how optimal monetary policy is affected by differences in the combination of shocks an economy experiences and the rigidities it exhibits. Without both nominal rigidities and economic shocks, monetary policy would be irrelevant. Recognizing this, policymakers increasingly...

Aggregate shocks that move output and inflation in opposite directions create a tradeoff between output and inflation variability, forcing central bankers to make a choice. Differences in the degree of accommodation of shocks lead to disparate variability outcomes, revealing national central...

Among the many challenges facing the new Eurosystem is the possibility that the regions of the euro area will respond differently to interest rate changes. In this essay, I provide evidence that differences in financial structure are the proximate cause for these national asymmetries in the...