Widespread private capital inflows to middle-income countries have surged over the past three years. At the same time, Brady-type debt reduction operations and domestic policy reform took place, indicators of country creditworthiness improved dramatically, and international interest rates...

Most developing countries intervene extensively in financial markets, setting ceilings on interest rates and spreads and allocating much (often between half and all) of formal credit to"priority"uses. This study reviews interest rate controls and other repressive financial policies on investment...

Economic stability, sound macroeconomic policies, and appropriate microeconomic incentives hold down a country's external debt burden. Most of the Asian countries pursued prudent macroeconomic policies, paid attention to price stability, and minimized price distortions. These countries avoided...

Assuming that liquidity constraints exist in most developing countries, the majority of analysts believe that increasing real interest rates will raise the volume of lending and hence private investment. The author, focusing on the demand for capital goods, argues that the positive effect on the...

The author provides a selective review of the recent analytical and empirical literature on the benefits and costs of international financial integration. He discusses the impact of financial openness on consumption, investment, and growth, and the impact of foreign bank entry on the domestic...

The author argues that externalities in financial markets, implicit and explicit guarantees on financial transactions, and information asymmetries in financial markets that may exacerbate contagion provide a rationale for a government role in managing the risk associated with cross-border...

The debate about the relationship between democratic forms of government and the free movement of capital across borders dates to the 18th century. It has regained prominence as capital on a massive scale has become increasingly mobile and as free economies experience continuous pressure from...

Most people agree that the soundness of macroeconomic policies should be judged by their efficacy in meeting the objectives of steady growth, full employment, stable prices, and a viable external payments situation. What people debate about are the links between macroeconomics and economic...

The authors present a simulation model (applied here to Uruguay and implemented in Javelin) that permits analysis of the interaction between a financial system and the economic environment in which it operates. The model allows the user to compute and project the indicators necessary to monitor...

The impact of permanent real depreciation on a country's capital stock is uncertain. Whether total capital stock rises or falls depends on how depreciation affects aggregate demand, the real interest rate, and especially the import content of capital goods. In the long run, the capital stock can...