This paper reviews the large and growing literature which tests PPP and other models of the long-run real exchange rate. We distinguish three different stages of PPP testing and focus on what has been learned from each. The most important overall lesson has been that the real exchange rate...

This paper provides a comprehensive assessment of empirical evidence about the impact of financial globalization on growth and volatility in developing countries. The results suggest that it is difficult to establish a robust causal relationship between financial integration and economic growth....

The overhang of debt (private and surging public) is perhaps the principal reason why recessions following financial crises are so deep and lasting. Frequently, a wave of international financial and banking crises is followed by a wave of sovereign defaults. This is the case of the Eurozone...

The global financial crisis serves as a reminder of the risks of financial globalization. After grappling with surges of capital inflows earlier in this decade, many emerging market and developing economies experienced a sharp reversal of those inflows in late 2008 as a result of the crisis....

The paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages. Explicit solution of the wage-setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare, expected output, and the expected terms of trade....

Conventional explanations of the near random walk behavior of real exchange rates rely on near random walk behavior in the underlying fundamentals (e.g., tastes and technology). The present paper offers an alternative rationale, based on a fixed factor neoclassical model with traded and...

A dynamic bargaining-theoretic framework is used to analyze multilateral negotiations for rescheduling sovereign debt. The analysis illustrates how various factors, such as the debtor's gains from trade and the level of world interest rates, affect the relative bargaining power of various...

This paper presents evidence that public debts in the advanced economies have surged in recent years to levels not recorded since the end of World War II, surpassing the heights reached during the First World War and the Great Depression. At the same time, private debt levels, particularly those...