This paper characterizes jointly optimal default and exchange-rate policy in a small open economy with limited enforcement of debt contracts and downward nominal wage rigidity. Under optimal policy, default occurs during contractions and is accompanied by large devaluations. The latter inflate...

This paper characterizes jointly optimal default and exchange-rate policy. The theoretical environment is a small open economy with downward nominal wage rigidity as in Schmitt-Grohé and Uribe (2013) and limited enforcement of international debt contracts as in Eaton and Gersovitz (1981). It is...

The plethora of currency crises around the world has fueled many theories on the causes of speculative attacks. The first-generation models focus on fiscal problems. The second-generation models emphasize countercyclical policies and self-fulfilling crises. In the 1990s, models pinpoint to...

This paper analyzes the relevance of external factors in average quarterly GDP growth for 1990-2006 in the seven largest Latin American countries (LAC7). Modeling the relationship between LAC7 GDP and several external factors, it is found that those factors account for a significant share of...

This paper explores the impacts of sovereign defaults on trade and income through a real exchange rate channel, in a DSGE model of two risk-averse open economies, with production. In the model, once the borrower country defaults due to an adverse productivity shock, foreign firms reduce their...

We use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for Greek government bonds. We argue that the crisis itself and its escalating nature are very likely to be the result of: (a) steady deterioration of Greek macroeconomic...

This eBook covers the more relevant subjects in international finance and risk managment from an emerging markets perspective. The general approach is on open economy macroeconomics, very useful to comprehend the main effects of the financial crisis of 2008 and understand international finance...

This paper builds upon the model of Kaminsky and Reinhart (1999) and extends it to triplecrises. It applies a new visualisation approach combining elements of an event study analysis and a fan chart technique. This approach illustrates the deviation of fundamentals in the runup to...

We use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for Greek government bonds. We argue that the crisis itself and its escalating nature are very likely to be the result of: (a) steady deterioration of Greek macroeconomic...