Episodes of large capital inflows in small open economies are often associated with a shift of resources from the tradable to the non-tradable sector and sometimes lead to balance-of-payments crises. This paper builds a two-sector dynamic model to study the evolution of the sectoral structure...

Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. The purpose of this paper is to investigate the importance of certain credit market imperfections...

This paper sheds light on the linkages between interbank repo and banking crises. It examines the impacts of repos on the economy, with and without reverse, and the effectiveness of the regulations in preventing the runs. It develops an overlapping generations framework which allows for the...

This paper develops a quantitative general equilibrium model of sovereign default with heterogeneous agents to account for spillover of default risk across countries. Borrowers (sovereign governments) and foreign lenders (investors) in the model face financial frictions, which endogenously...

I introduce endogenous capital accumulation into an otherwise standard quantitative sovereign default model in the tradition of Eaton and Gersovitz (1981), and find that conditional on a level of debt, default incentives are U shaped in the capital stock: the economy with too small or too large...

Deeper financial integration is expected to enable low-saving countries to increase domestic investment but also to increase crisis risks by facilitating the accumulation of risky foreign liabilities. This paper explores the connections between financial integration, investment and crisis risk...

This paper analyzes the relation between country specific high-frequency activity indicators and bond holdings in the portfolio of global investors. Based on positions from more than 20,000 investment funds, we show that bond flows are clearly impacted by high-frequency activity levels, as well...

The complexity of the Cyprus crisis makes answering the question of the title difficult, while the policy implications make the question important. However, the answer to this question unavoidably points the finger to those responsible, and as a result the quest for an answer is clouted by...

The Cyprus debt crisis provides some unique lessons. By the time an assistance program was agreed with the Troika of international lenders, the problem had become so complex that a depositor bail-in was implemented to safeguard financial stability. The bail-in was an ad hoc solution applied for...

Sovereign debt crises do not need to be viral. Whether they are depends on the government's interaction with the private sector. The more open an economy, the less likely it is that a sovereign debt crisis will infect the domestic private sector. More importantly, the larger the government's...