This paper analyzes the trade-off between official liquidity provision and debtor moral hazard ininternational financial crises. In the model, crises are caused by the interaction of bad fundamentals,self-fulfilling runs and policies by three classes of optimizing agents: international...

The provision of liquidity by international institutions such as the IMF to countries experiencing balance of payment problems could prevent liquidity runs but could also cause moral hazard distortions: expecting to be bailed out by the IMF, debtor countries would have weak incentives to...

A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to effcient risk-sharing, negatively correlated with cross-country consumption ratios. This paper shows that incomplete asset markets and a low price elasticity of tradables can account...

The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even if market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe...

The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even if market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe...

In his seminal contribution on exchange rate crises, Krugman models speculative attacks as optimal market reactions to policy rules that are inconsistent with the inde…nite survival of a …xed nominal parity. Later contributions have shifted the focus of the analysis, modelling...

A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to effcient risk-sharing, negatively correlated with cross-country consumption ratios. This paper shows that incomplete asset markets and a low price elasticity of tradables can account...

'New open economy macroeconomics' (NOEM) refers to a body of literature embracing a new theoretical framework for policy analysis in open economy, aiming to overcome the limitations of the Mundell-Fleming model while preserving the empirical wisdom and policy friendliness of traditional...

It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...

We study the interaction of fiscal and monetary policies during a currency crisis in an economy with government nominal liabilities. We show that the stock and maturity of these liabilities are key determinants of the magnitude, timing and predictability of a devaluation. Among notable features...