This paper examines the propagation of monetary shocks in a two-good optimizing macromodel where domestic banking activity is costly and the non-tradable sector is highly dependent on domestic bank credit, as in most emerging market economies. The model develops the Bernanke-Blinder credit view...

Macroeconomic theory postulates that fiscal deficits cause inflation. Yet empirical research has had limited success in uncovering this relationship. This paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory. Unlike...

A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking pure country and industry factors are...

A striking feature of sovereign lending is that many countries with moderate debt-to-income ratios systematically face higher spreads and more stringent borrowing constraints than others with far higher debt ratios. Earlier research has rationalized the phenomenon in terms of sovereign...

We re-appraise the cross-country evidence on the dollarization of financial systems in emerging market economies. Amidst striking heterogeneity of patterns across regions, we identify a broad global trend towards financial sector de-dollarization from the early 2000s to the eve of the global...

We show how vicious circles in countries' credit histories arise in a model where output persistence is coupled with asymmetric information about output shocks. In such an environment, default signals the borrower's vulnerability to adverse shocks and creates a pessimistic growth outlook. This...

The role of exchange rate flexibility in the periphery of the gold standard has been grossly overlooked. This paper builds a new dataset on trade-weighed exchange rates for the period 1870-1913 and finds that large currency movements in periphery countries operating inconvertible paper-money and...

Following the liberalization reforms of the late 80s and early 90s, several emerging market economies have experienced large and persistent trade deficits. This paper focuses on the Argentine experience, examining the extent to which trade imbalances in the 1990s resulted from income and...