The risk of repudiation plays a central role in the size and nature of international capital flows. In this paper the author addresses the question of whether, in a world of international capital flows with risk of default, strategic externalities provide a rationale for regulation of...

This paper examines a unique data set consisting of Japanese equity returns for the Friday, Monday, and Tuesday surrounding U.S. Monday holiday closures. The objective is to neutralize the impact of spillover effects from New York to Tokyo. Prior studies find that Japanese returns are negative...

The interest rate swap market has grown rapidly. Since the inception of the swap market in 1981, the outstanding notional principal of interest rate swaps has reached a level of $12.81 trillion in 1995. Recent surveys indicate that interest rate swaps are the most commonly used interest rate...

In this paper we examine integration between emerging and U.S. debt and equity markets. We first investigate price changes around significant "events," in this case changes in short-term U.S. interest rates brought about by actions of the Federal Reserve. Second, we estimate the predictability...

A country's financial system is internationally illiquid if its potential short-term obligations in foreign currency exceed the amount of foreign currency it can have access to in short notice. This condition may be necessary and sufficient for financial crises and/or exchange rate collapses...

Until recently, the trend in world capital markets has been toward increasing "globalization." Recent events in Latin America and Asia have forced a rethinking of the desirability of unrestricted world capital flows. In this paper we ask whether simple restrictions on capital mobility can...

The implications of the costs of doing business in foreign countries for the resulting capital market equilibrium are studied. When transferring capital goods across national boundaries, the costs incurred are quasi-fixed in a one-good, two-country, intertemporal model with complete financial...

Extant models of exchange rate behavior have typically relied on statistical rather than economic considerations. The approach has been to employ a variant of the generalized central limit theorem to develop tests for the models proposed. ; We propose a minimal set of simple economic...

Credit rating agencies are frequently criticized for producing biased sovereign ratings. This article discusses how the home country of rating agencies could affect rating decisions as a result of political economy influences and cultural distance. Using data from nine agencies based in six...

Credit rating agencies are frequently criticized for producing sovereign ratings that do not accurately reflect the economic and political fundamentals of rated countries. This article discusses how the home country of rating agencies could affect rating decisions as a result of political...