The paper assesses the costs and benefits of active international reserve management (IRM), shedding light on the question of how intense should IRM be for an emerging market. In principle, an active IRM strategy could lower real exchange rate volatility induced by terms of trade shocks; provide...

The policy Trilemma (the ability to accomplish only two policy objectives out of financialintegration, exchange rate stability and monetary autonomy) remains a valid macroeconomicframework. The financial globalization during 1990s-2000s reduced the weighted average ofexchange rate stability and...

This paper studies the degree to which Emerging Markets (EMs) adjusted to the global liquidity crisis by drawing down their international reserves (IR). Overall, we find a mixed and complex picture. Intriguingly, only about half of the EMs relied on depleting their international reserves as part...

We investigate the relationship between economic growth and lagged internationalcapital flows, disaggregated into FDI, portfolio investment, equity investment, and shorttermdebt. We follow about 100 countries during 1990-2010 when emerging marketsbecame more integrated into the international...

In this paper we explore lessons from the global liquidity crisis pertaining to the prudential supervision role of central bank in an open economy. The narrow view of the role of central banks has been seriously challenged by the global liquidity crisis of 2008-9. The crisis validates central...

This paper discusses two pertinent policy issues dealing with the global liquidity crisis - global prudential regulation reform, and reassessment of using international reserves in the crisis. We point out the paradox of prudential regulations – while the identity of economic actors that...

This paper examines how financial expansion and contraction cycles affect the broader economy throughtheir impact on eight real economic sectors in a panel of 28 countries over 1960-2005, paying particularattention to large, or sharp, contractions and magnifying and mitigating factors. We find...

Using the “trilemma indexes†developed by Aizenman et al. (2010) that measure the extent ofachievement in each of the three policy goals in the trilemma—monetary independence, exchange ratestability, and financial openness—we examine how policy configurations affect...

This paper studies the impact of global factors on patterns of basic research across countries and time. We rely on the records of major scientific awards, and on data dealing with global economic and historical trends. Specifically, we investigate the degree to which scale or threshold effects...

This paper presents a model comparing the optimal degree of asset class diversification abroadby a central bank and a sovereign wealth fund. We show that if the central bank manages itsforeign asset holdings in order to meet balance of payments needs, particularly in reducing theprobability of...