Current account imbalances and their sustainability are among the most debated international policy issues. Through the recently designed External Balance Assessment methodology (EBA), the IMF estimates the impact of several countries' fundamentals and policies on their current account balance,...

This study using aggregate data from 1970 to 2012, investigates balance of payments adjustment and productivity growth in Nigeria by specifying a small macro-econometric model to analyze the various channels through which the economy's Bop position could be enhanced. The empirical model...

Current account imbalances have been a decisive feature of the European banking and sovereign debt crisis. This paper investigates the drivers of euro area current accounts, their divergence and subsequent rebalancing, within a structural model accommodating potential regime changes at the...

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign's willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does...

Using dynamic factor models and state-space techniques we quantify financial cycles for twenty European countries over the period 1960Q1–2015Q4 capturing imbalances across credit, housing, bond and equity markets. The paper documents the existence of slow-moving and persistent financial cycles...

The empirical literature has long established that U.S. interest rates are an important driver of international portfolio flows, with lower rates “pushing” capital to emerging markets. On the basis of this literature, it is often argued that the Federal Reserve’s imminent policy tightening...

We test for sustainability of Turkey’s current account position between 1987 and 2009 using the intertemporal solvency model of Craig S. Hakkio and Mark Rush (1991) and Steven Husted (1992). According to this approach, the intertemporal budget constraint is satisfied if there is cointegration...

We examine the open macroeconomic policy choices of developing economies from the perspective of the economic "trilemma" hypothesis. We construct an index of divergence of the three trilemma policy choices, and evaluate its patterns in recent decades. We find that the three dimensions of the...

Home bias is a perennial feature of international capital markets. We review various explanations of this puzzling phenomenon highlighting recent developments in macroeconomic modelling that incorporate international portfolio choices in standard two-country general equilibrium models. We refer...

Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms...