This paper studies the interaction between monetary and fiscal authorities while investors are coordinating on a speculative attack. The authorities want to achieve specific targets for output and inflation but also to avoid a regime change (i.e. sovereign default). They use the traditional...

We extended the Cole and Kehoe model (1996) by adding trade and debt denominated in national currency. We then evaluated some external debt defaults and steep national currency devaluations occurred during last decades. Although default is unlikely, steep devaluation has been repeatedly...

This study investigates the relationship between cross-sectional carry trade returns and global foreign exchange volatility risk. During periods of high volatility innovations, the average carry trade returns on emerging markets are higher than that of all countries or developed economies....