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Persistent link: https://www.econbiz.de/10001864517
This paper presents a theory of institutional specialization in which some countries uphold the rule of law while others choose extractive institutions, even when countries are ex-ante identical. The driving force of specialization is that for incumbents in each country, the first steps to the...
Persistent link: https://www.econbiz.de/10013226956
We argue that the sheer rational expectation about some typical behaviors of retail investors can induce large and persistent overpricing in popular high-risk stocks. It is well-known that retail investors like distressed stocks. Hence, in a distress scenario, retail investors' increased demand,...
Persistent link: https://www.econbiz.de/10013237473
This paper argues that short selling might give rise to bubbles that would otherwise not exist in equilibrium. It is crucial for the argument that short selling is not the same as issuing an asset: it may require buying the stock later on. An asset with no fundamental value might be traded at...
Persistent link: https://www.econbiz.de/10013238298
It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...
Persistent link: https://www.econbiz.de/10013244391
Persistent link: https://www.econbiz.de/10014012881
This paper empirically investigates the impact of changes in US real interest rates on sovereign default risk in emerging economies using the method of identification through heteroskedasticity. Policy-induced increases in US interest rates starkly raise default risk in emerging market...
Persistent link: https://www.econbiz.de/10013101894
Motivated by a novel stylized fact - countries with isolated capital cities display worse quality of governance - we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by...
Persistent link: https://www.econbiz.de/10013082160
Persistent link: https://www.econbiz.de/10008664114
We empirically analyse the appropriateness of indexing emerging market sovereign debt to US real interest rates. We find that policy-induced exogenous increases in US rates raise default risk in emerging market economies, as hypothesised in the theoretical literature. However, we also find...
Persistent link: https://www.econbiz.de/10003894416