Using the “trilemma indexes” developed by Aizenman et al. (2008) that measure the extent of achievement in each of the three policy goals in the trilemma—monetary independence, exchange rate stability, and financial openness—this paper examines how policy configurations affect...

This paper presents a model comparing the degree of asset class diversification abroad by a central bank and a sovereign wealth fund. We show that if the central bank manages its foreign asset holdings in order to meet balance-of-payments needs, particularly in reducing the probability of sudden...

We investigate the determinants of the performance of emerging markets (EMs) during five United States (US) Federal Reserve monetary tightening and easing cycles from 2004 to 2023. We study how macroeconomic and institutional conditions of an EM at the beginning of a cycle explain EM resilience...

The sizable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism-hoarding international reserves in order to improve competitiveness. From a long-run perspective, manufacturing exporters in East Asia...

We explore the role of sectoral debt dynamics in shaping business cycles in a sample of 52 Emerging Market Economies (EMEs) and Frontier Market Economies (FMEs) from 2005 to 2021. Higher household debt levels and growth are associated with significantly slower GDP growth in more developed EMEs...

The paper characterizes the feasibility of economic transformation as requiring the simultaneous attainment of macroeconomic stability, political support, and adequate private investment. Macroeconomic stability is defined as fiscal balance; political feasibility is related to the income gains and...

Starting with Friedman and Mundell the academic literature has conducted a high level debate concerning the design of cross-country monetary arrangements. That debate has become very complex and the data requirements necessary for appropriate application of the principles developed are far...

This paper examines the effect of trade reform on wages and unemployment in a two-sector, three-good economy in which labor is imperfectly mobile across sectors. Wages in the export sector are set so as to minimize turnover costs. The analysis shows that a reduction in tariffs, coupled with an...

The paper discusses the case against a laissez faire approach to resource allocation and develops a model of supply bottlenecks. It argues that: (1) once budget constraints are hardened and credit markets begin to function appropriately, externalities associated with production bottlenecks and...

In less than three decades, China has grown from playing a negligible role in international trade to being one of the world's largest exporters, a substantial importer of raw materials, intermediate outputs, and other goods, and both a recipient and source of foreign investment. Not...