China is well-placed to avoid the so-called “middle-income trap” and to continue to converge towards the more advanced economies, even though growth is likely to slow from near double-digit rates in the first decade of this millennium to around 7% at the 2020 horizon. However, in order to...

This paper discusses the experience of the EU`s eight new member countries (EU8) between 1995 and 2003 when the bulk of capital account liberalization took place, focusing on interest-rate-sensitive portfolio flows and financial flows. It takes stock of the lessons from capital flow patterns to...

The European sovereign debt crisis revived the discussion concerning the pros and cons of exchange rate adjustment in the face of asymmetric shocks. Exit from the euro area is to regain rapidly international competitiveness. Exchange rate stability with structural reforms could be beneficial for...

Output effects of currency crises are often estimated to be negative and persistent. A new banking crisis database allows us to construct pure currency collapses that are not associated with banking crises. The estimates show that countries facing a pure currency crisis have fully recovery of...

This paper considers the short-term effects of competitiveness shocks on macroeconomic performance in the euro area. Vector autoregressive models are estimated on quarterly data from 1995 to 2013 for individual countries and the whole euro area. The results show that competitiveness shocks help...

This paper considers the short-term effects of competitiveness shocks on macroeconomic performance in the euro area. Vector autoregressive models are estimated on quarterly data from 1995 to 2013 for individual countries and the whole euro area. The results show that competitiveness shocks help...

Since 1991, survey expectations of long-run output growth for the U.S. relative to the rest of the world exhibit a pattern strikingly similar to that of the U.S. current account, and thus also to global imbalances. We show that this finding can to a large extent be rationalized in a two-region...

This paper examines to what extent the build-up of 'global imbalances' since the mid-1990s can be explained in a purely real open-economy DSGE model in which agents' perceptions of long-run growth are based on filtering observed changes in productivity. We show that long-run growth estimates...

The process of globalization encompasses economic and financial integration. The abolition of capital controls and the dismantling of barriers of different kinds will expose previously sheltered companies to shocks on the global economic arena. Policy-makers in already globalized countries have...

We study how financial market effciency affects a measure of diversification of output across industrial sectors borrowed from the portfolio allocation literature. Using data on sector-level value added for a wide cross section of countries and for various levels of disaggregation, we construct...