We analyze why the Eurozone crisis increasingly resembles Latin America’s lost decade instead of Asia’s phoenix miracle, emphasizing the roles of the real exchange rate, the external environment, and debt restructuring. In addition, we contrast the adjustment to housing bubbles in Ireland,...

This paper argues that the crisis was an outcome of EMU: setting a common monetary policy for countries with different initial inflation rates. The crisis countries were those with high inflation rates which then had negative real interest rates and consequently over-borrowed. Current policy...

There are some striking similarities between the pre 1914 gold standard and EMU today. Both arrangements are based on fixed exchange rates, monetary and fiscal orthodoxy. Each regime gave easy access by financially underdeveloped peripheral countries to capital from the core countries. But the...

In this paper we broaden the standard debt sustainability framework used in the IMF-WB Heavily Indebted Poor Countries (HIPC) Initiative to include the analysis of domestic public debt and other feedback effects into the usual debt sustainability analysis (DSA). The latter does not take into...

With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in...

Ireland has been taken to be an exemplary case of successful growth-promoting fiscal retrenchment, not once but twice – first, in the fiscal consolidation undertaken in the late 1980s, which was taken as one of the classic original instances of ‘expansionary fiscal contraction’, and again...

Acronyms for groups of countries provide an often useful shorthand to capture emergent similarities, and terms such as PIIGS, BRICs and LDCs pervade the lexicon of international and comparative political economy. But they can also lead to misleading narratives, since the grounds for use of these...

This paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries. It finds that in emerging market countries there is a significant correlation between spreads and debt levels. This correlation,...

Infrastructure investment has high economic returns, especially in ASEAN economies where enhanced connectivity is critical for their continued prosperity. Each member government needs to ensure infrastructure gaps are narrowed through both the government’s own funding and public-private...

The theory of optimal currency areas states that a currency union may succeed if the participating countries have complementary industry structures. If this is not the case a currency union does not, inevitably, have to fail because market forces will induce adjustments of the industry...