Certain growth-promoting policies can have negative side-effects by increasing the vulnerability of economies to financial crises. Typical examples are greater openness to financial flows or more liberalised financial markets. This paper investigates whether the growth benefits of policy reforms...

A simple econometric framework is presented linking current account balances of euro area countries to intra and extra euro area competitiveness, cyclical positions, fiscal positions and the oil price. The framework is then used to cyclically-adjust observed current account balances and...

The post financial crisis period has been associated with increased countercyclical use of various financial policies, including residency-based measures. This paper analyses in a single analytical framework the relative effectiveness of three types of financial policies – macroprudential...

This paper investigates the effect of structural characteristics on debt limits of middle income countries. Two equations relate the probability of default to the interest rate. First, the probability of default is estimated with a logit model. Second, the assumption of non-arbitrage opportunity...

This paper provides robust empirical evidence that government effectiveness is a key determinant of sovereign defaults. Government effectiveness is measured by a broad-based perception index of the Worldwide Governance Indicators database (WGI) disseminated by the World Bank. Public debt and...

Recent episodes of large exchange rate movements, such as for Japan or the United Kingdom, have typically not been associated with large changes in trade balances and despite the polarisation of international investment positions large currency fluctuations during the global crisis of 2008-09...

After peaking in the first half of 2008, international imbalances declined sharply during the global crisis of 2008-09, in part reflecting cyclical factors such as large contractions in domestic demand on the back of bursting housing bubbles in a number of deficit countries, as well as large...

Low growth and huge current account deficits have characterised the Portuguese economy over the past decade. Easy credit in global markets, combined with the absence of incentives to limit loan-to-deposit ratios until recently, made it possible to finance internationally high levels of...

Turkey’s current account deficit widened to almost 10% of GDP in 2011 and has been narrowing only gradually since. An important question is to what extent Turkey’s current account deficit is excessive. To explore this issue, one needs to establish benchmarks. In this paper current account...

Effective macroeconomic and structural policies helped Turkey bounce back quickly and strongly from the global crisis, with annual growth averaging close to 9% over 2010-11. However, the current account deficit widened to around 10% of GDP in 2011 and consumer price inflation rose to over 10%....