Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease the financing constraints of host country firms. But if incoming foreign investors borrow heavily from domestic banks, foreign direct investment...

The authors reexamine a classic question in international economics: What is the current account response to a transitory income shock such as a temporary improvement in the terms of trade, a transfer from abroad, or unusually high production? To answer this question, they construct a world...

The objective of this paper is to empirically test across alternative, apparently observationally equivalent theories of currency crises. Theories of crises are often difficult to distinguish from each other based on the behavior of commonly used predictors. Using a comprehensive data set on...

For the past two decades, Chile has consistently pursued a course of macroeconomic stabilization and deep economic reform. But in recent years, real exchange rate appreciation and persistent moderate inflation have become key concerns for Chilean policymakers, suggesting the need for further...

The design of effective aid programs depends on the diagnosis of the problem. To say that institutional failures are central to Africa's poor economic performance is not to repudiate early interpretations based on policy failures and capital shortages. Institutional failures produce policy...

In discussing the causes and consequences of large capital inflows to developing countries, the author emphasizes two things. First, although there are legitimate grounds for an optimistic long-term outlook on private capital flows to developing countries, there is little to suggest that the...

The authors consider external sustainability from the perspective of equilibrium in net foreign asset positions. Under their approach, an external situation is sustainable if it is consistent with international and domestic investors'achieving their desired portfolio allocation across countries....

This paper explores empirically the role of risk and return in the observed evolution of net foreign asset positions of industrial and developing economies. The paper adopts a dynamic approach in which investors'portfolios adjust gradually to their long-run equilibrium, defined by a standard...

The author explores the effects a transition from a pay-as-you-go (PAYG) social security system to a fully funded system may have on income distribution, fiscal policy, and capital accumulation. The author presents a heterogeneous agent model developed to study the transition from a...

The authors identify as the primary cause of the East Asian crisis a fundamental reassessment of the profitability of investments in the region. They identify a number of secondary shocks as well, including interest risk premia, monetary expansion, and declines in output brought about by...