Balance of payment crises, characterized by Sudden Stops, are not a phenomenon exclusive to emerging economies. This paper identifies 16 and 50 crises in advanced and emerging economies, respectively. Further, decomposing the Financial Account uncovers important differences between both groups...

Why are balance of payments crises, characterized by Sudden Stops of capital inflows, more frequent in emerging economies than advanced economies? This paper argues that differences in the composition of the financial account flows explain 30 percent of the gap in the probability of a crisis....

An implication of the ""globalization hazard"" hypothesis is that sudden stops could be prevented by offering foreign investors price guarantees on emerging markets assets. These guarantees create a tradeoff, however, because they weaken globalization hazard by creating international moral...

Uncertainty about the riskiness of new financial products was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn ""by...

This paper studies overborrowing, financial crises and macro-prudential policy in an equilibrium model of business cycles and asset prices with collateral constraints. Agents in a decentralized competitive equilibrium do not internalize the negative effects of asset fire-sales on the value of...