Using a new database on the currency composition of assets and liabilities, this paper explores the determinants and consequences of currency mismatches in Chilean non-financial firms. As in previous firm level studies for Chile, we find that in periods following a depreciation firms with higher...

This paper identifies Chile`s economic weaknesses and offers policy recommendations for increasing stability. Current problems include weak international financial links, a Central Bank mandate that is ill-designed to deal with terms of trade shocks, a propensity to waste scarce liquidity in the...

This study assesses macroeconomic volatility in Costa Rica, based largely on politically weak governments` inability or unwillingness to effect key reforms. Notable problems include volatility-prone fiscal and monetary policy, structurally weak public finances due to large domestic debts and...

It has been common to attribute financial crises to short-term capital inflows, while foreign direct investment (FDI) is seen as a safer form of finance. The relationship between crises and the composition of capital flows is particularly relevant at present because the flow of capital to Latin...

This paper examines how UK banks channel capital inflows to the individual sectors of the domestic economy and to overseas residents. Information on the source country of foreign capital deposited with UK banks allows us to construct a novel Bartik instrument for capital inflows. Our results...

We present a simple model that can account for the main features of recent financial crises in emerging markets. The international illiquidity of the domestic financial system is at the center of the problem. Illiquid banks are a necessary and a sufficient condition for financial crises to...

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific...

Tests of the present-value model of the current account are frequently rejected by the data. Standard explanations rely on the "usual suspects" of nonseparable preferences, shocks to fiscal policy and the world real interest rate, and imperfect international capital mobility. The authors confirm...

The risk of repudiation plays a central role in the size and nature of international capital flows. In this paper the author addresses the question of whether, in a world of international capital flows with risk of default, strategic externalities provide a rationale for regulation of...

This paper examines a unique data set consisting of Japanese equity returns for the Friday, Monday, and Tuesday surrounding U.S. Monday holiday closures. The objective is to neutralize the impact of spillover effects from New York to Tokyo. Prior studies find that Japanese returns are negative...