abandonment time is a decreasing function of the size of the fiscal shock. For large fiscal shocks, immediate abandonment is …

This paper analyzes the optimal time to abandon a fixed exchange rate regime in response to a fiscal shock that renders … large fiscal shock it is optimal to abandon the peg as soon as the shock occurs, regardless of the level of international … fiscal shock plays no direct role in the decision to abandon the peg and matters only insofar as it affects the speed at …

, risk‐sharing through portfolio diversification and private transfers is rather limited, but the overall percentage of shock … absorption occurring through private risk‐sharing channels hovers around four‐fifths, as opposed to around one‐fifth of a shock …

area. We estimate a Bayesian VAR with sign restrictions, using standard restrictions for the domestic impact of the shock …