We examine corporate sector vulnerabilities in Brazil, Chile, Colombia, Mexico and Peru. First, we identify stylized facts based on corporate financial indicators. Second, we assess vulnerability of individual firms to a sudden stop in financing through a probit model, using a panel of 18...

Robust GDP growth, declining unemployment, low and stable inflation, and a string of fiscal and current account surpluses -- it's a record to be envied. These outcomes in Canada owe much to sound macroeconomic policies, as well as to a favorable external environment. This book focuses on these...

This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy...

Policymakers in many emerging markets are attempting to resist currency appreciation while simultaneously meeting targets for inflation. Using the recent experience of Colombia between 2004 and 2007, this paper examines the effectiveness of the Central Bank's intervention in stemming domestic...

The weakness of the euro has been surprising given the widely-held expectation that it would be a strong currency. This paper critically examines explanations for the slide in the euro, finding that many are questionable on conceptual or empirical grounds. Two explanations are instead advanced...

The paper examines the effect of exchange rate changes on consumer prices in Tanzania using structural vector autoregression (VAR) models. Using a data set covering the period 1990-2005, we find that the exchange rate pass-through to inflation declined in the late 1990s despite the depreciation...

The countries of Eastern Europe achieved two remarkable transitions in the short period of the last two decades: from plan to market and, then, in the run-up to and entry into the European Union, they rode a wave of global trade and financial market integration. Focusing on the second...

This paper uses a DSGE model to examine whether including the exchange rate explicitly in the central bank's policy reaction function can improve macroeconomic performance. It is found that including an element of exchange rate smoothing in the policy reaction function is helpful both for...

This paper presents an empirical analysis of the medium- and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate...

The significant real exchange rate appreciation in Armenia and Georgia since 2003, coupled with persistent current account deficits, raises the question of whether real exchange rates have become overvalued. This paper seeks to identify possible exchange rate misalignment by applying the...