This paper provides a theoretical model that explains the empirical observation that foreign banks from industrialized countries tend to increase their involvement in emerging markets during periods characterized by instabilities. In this model, domestic banks have more 'soft' information about...

In economies with perfect competition, environmental tax rates should be set equal to the equilibrium marginal damage. There are two basic reasons to depart from this first best rule: incomplete competition and the possibility of using environmental policy as a strategic trade instrument in open...