With inflation under control in many in middle income countries (MICs), it is now swings in credit, investment and asset prices that affect these countries the most. In this paper we present a framework to analyze both theoretically and empirically how credit market shocks are propagated and...

Conventional wisdom claims that fixed exchange rates provide more fiscal discipline than do flexible rates, but the recent experiences in Europe, the record of Sub-Saharan countries in the 1980s, and the history of stabilization attempts in Latin America cast empirical doubts on this wisdom. To...

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have...