Survey data on a broad cross section of 17 currencies are used to determine whether the forward discount moves primarily in response to changes in expectations of depreciation, or in the risk premium. We find that, in contrast to earlier studies involving developed country exchange rates,...

The accumulated experience of emerging markets over the past two decades has laid bare the tenuous links between external financial integration and faster growth, on the one hand, and the proclivity of such integration to fuel costly crises on the other. These crises have not gone without...

This paper interprets contagion effects as an increase in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets,...

This paper examines the effect of skill-biased technological change on the structure of wages, the composition of employment and the level of unemployment in a two-sector economy with a heterogenous work force. Efficiency wage considerations and minimum wage legislation lead to labor market...

This paper analyzes the macroeconomic effects of fiscal and labor market policies in developing countries. The basic framework considers a small open economy with a large informal production sector and a heterogeneous work force. The labor market is segmented as a result of efficiency...

This paper investigates the factors determining the impact of exchange rate regimes on the behavior of domestic investment and foreign direct investment (FDI). Producers may diversify internationally in order to increase the flexibility of production. We characterize the possible equilibria in a...