A model of external crises is developed focusing on the interaction between liquidity creation by financial intermediaries and foreign exchange collapses. The intermediaries' role of transforming maturities is shown to result in larger movements of capital and a higher probability of crises....

Using secondary market debt prices and country credit ratings this paper provides evidence of contagion in emerging markets. It shows that fundamentals are unable to explain the cross-country comovement of creditworthiness in Latin American countries. It also shows that contagion cannot be...

This paper describes the main tools used to analyze the exchange rate in the process of conducting and analyzing the macroeconomic policies of the Chilean Central Bank (CCB). In doing so, we first describe the main methodologies used to construct real exchange rate (RER) indices, and corroborate...

The international financial system (IFS) has undergone a series of financial crises over the past decade.This paper analyzes the shortcomings of said system (that have contributed to the crises) and, with them in mind, reviews and evaluates the IFS reform proposals for a “New International...

In this paper we present a model of international interest rate arbitrage under conditions of entry and exit costs to and from the domestic capital market. We seek to measure the maximum potential effect of capital controls, such as non-interest paying reserve requirements, on interest rate...

We calculate and compare optimal monetary policy (MP) rules for a simple economy under alternative central bank objective (loss) functions. We compare both soft- and hard-edges range (zone) targeting as well as asymmetric loss-functions to a quadratic loss case. The latter represents the...

Large holdings of foreign assets and liabilities, along with increasing relevance of valuation effects—capital gains or losses—have characterized global financial integration. In this paper, we assess empirically the implications of stocks, flows and valuation adjustments in external crises...

Creation-DaThis brief review takes stock of the recent literature on current account and external financing and presents new analytical results and empirical research on the subject. Four key areas of related research are presented, namely global imbalances and macroeconomic adjustment; external...

Indexation is common practice in both developed and developing countries. During recent years, however, many less developed economies that have implemented relatively successful stabilization plans, have included as part of the reform package wage nominalization and/or the use of the exchange...

The Central Bank of Chile was granted full autonomy by a Constitutional Organic Law enacted in 1989. In this paper we conduct a selective review of theoretical and empirical literature on the macroeconomic performance and autonomy of the Central Bank, presenting new evidence of the relationship...