The dominant view in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods. This paper shows that this dominant view does not hold in Mexican data for the periods in which the country...

Variance decompositions of the Mexico-United States real exchange rate are examined using monthly data on consumer prices and the nominal exchange rate for the period January, 1969 to February, 2000. The results show that the robust result found in industrial-country data that most of the...

This paper argues that the globalization of securities markets may promote contagion among investors by weakening incentives for gathering costly country-specific information and by strengthening incentives for imitating arbitrary market portfolios. In the presence of short-selling constraints,...

The dominant view in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods. This paper shows that this dominant view does not hold in Mexican data for the periods in which the country...

Variance decompositions of the Mexico-United States real exchange rate are examined using monthly data on consumer prices and the nominal exchange rate for the period January, 1969 to February, 2000. The results show that the robust result found in industrial-country data that most of the...

This paper shows that globalization of securities markets exacerbates the volatility of capital flows by strengthening incentives for herding behavior. This is a prediction of a mean-variance portfolio optimization model with imperfect information, in which investors acquire country-specific...

This paper shows that the dominant view that the high variability of real exchange rates is due to movements in exchange rate-adjusted prices of tradable goods does not hold for Mexican data for periods with a managed exchange rate. The relative price of nontradables accounts for up to 70...

We test the hypothesis that net foreign asset positions are consistent with external solvency and examine the dynamics of external adjustment using data for 50 countries over the 1970-2006 period. Our analysis adapts Bohn's (2007) error-correction reaction function approach - which tests for a...

This paper argues that dollarization can be beneficial for countries where credit-market frictions and non-credible stabilization policies are large distortions on economic activity and welfare. A dynamic general-equilibrium model with these features is proposed for the case of a small open...

We study the short- and long-run effects of financial integration in emerging economies using a two-sector model with a collateral constraint on external debt and trading costs incurred by foreign investors. The probability of a financial crisis displays overshooting: It rises sharply initially...