Financial innovation increases markets' liquidity and provides economic agents with new instruments to better handle risks, but it reduces the efficacy of monetary policy while strengthening the logic and force of the “unholy trinityâ€. Increased liquidity of financial markets and...

Recent literature has proposed two alternative types of financial frictions, i.e., limited commitment and incomplete markets, to explain the empirical patterns of international capital flows between developed and developing countries in the past two decades. This paper integrates these two...

Latin America's economies have made tremendous improvements in recent years. Following the lost decade of the 1980s, economic growth has resumed. But the fruits of this progress remain to be consolidated. The political consensus supporting reform is fragile, and the economies of the region are...