Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constraints credit and lowers welfare. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Once this assumption is relaxed, there...

Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constraints credit and lowers welfare. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Once this assumption is relaxed, there...

Conventional wisdom views the problem of sovereign risk as one of insufficient penalties. Foreign creditors can only be repaid if the government enforces foreign debts. And this will only happen if foreign creditors can effectively use the threat of imposing penalties to the country. Guided by...

Banks act as maturity transformers, who take liquid deposit and invest in illiquid assets. In this classical framework, we introduce uncertainty in the asset returns. We show that banks can insure individuals against the risk of illiquidity at the cost of increasing the riskIness of their...

We explore the impact of mortgage securitization on the international diversification of macroeconomic risk. By making mortgage-related risks internationally tradeable, securitization contributes considerably to better international consumption risk sharing: we find that countries with the most...

Does opening up capital markets facilitate risk diversification across borders? Are all countries gradually better off in the process of international financial integration? This paper explores welfare implications for various countries in a center-periphery framework with endogenous portfolio...

The goal of this paper is to analyse the interest rate differential as the possible main factor behind the capital inflows experienced by Costa Rica during the second semester of 2012. For this purpose, a panel data model for interest rate differential is estimated taking into consideration an...

This paper concerns an alternative of monetary policy operational framework for the newly created European Central Bank (ECB). Composed of 12 central banks (many of them with an outstanding prestige) it must create the new quality as the emerging single central bank of the large monetary union....

The aim of the article is a systemic summarization of processes, ways and main determinants influencing the relation between costs and benefits connected with the CR accession to the European Union. Author attempts to find out and to classify moments on macroeconomic both microeconomic level...

This paper makes a study of payment systems in the countries of the enlargement of the European Union for the period 1996-2003 and its comparison with the members of the European and Monetary Union. The general tendency is of a movement from cash to alternative instruments of payment. However,...