This paper explores empirically the role of risk and return factors in the observed evolution of net foreign asset positions of a large number of industrial and developing economies. The paper adopts a dynamic approach in which investors’ portfolios adjust gradually to their long-run...

The objective of this paper is to provide an exhaustive characterization of the empirical linkage between current account deficits and a broad set of economic variables proposed by the literature. In order to accomplish this task, we complement and extend previous empirical research by (1) using...

Public investment and infrastructure spending are often singled out for drastic cuts at times of fiscal retrenchment. Fiscal austerity in Latin America during the 1980s and 1990s was characterized by a sharp contraction in infrastructure spending. In 5 of the 9 major Latin American countries,...

Some key criteria in the optimal currency area literature are that countries should join a currency union if they have closer international trade links and more symmetric business cycles. However, both criteria are endogenous. Frankel and Rose (1998) find that trade intensity increases cycle...

Optimal stabilization policy is counter-cyclical, aiming at keeping output close to its potential. However it has been traditionally argued that emerging economies are unable to adopt counter-cyclical monetary and fiscal policy. Here we argue that the cyclical properties of macroeconomic...

World Trade has experienced an increased integration over the last 15 years. More than half of world trade currently takes place under actual or future trading blocks. Our main goal is to test whether free trade or regional integration agreements (FTA or RIA, respectively) have strengthened the...

This paper employs the Geweke decomposition test on pooled data of 109 developing and industrial countries from 1960 to 1994 to examine the direction of causality between financial development and economic growth. The paper finds that (1) financial development generally leads to economic growth;...

This paper provides an empirical evaluation of external vulnerability using panel data methods for a worldwide sample of countries. Controlling for domestic conditions, the paper examines the growth volatility effects of outcome measures of trade and financial openness as well as four types of...

There is widespread concern across Latin America that the provision of infrastructure services has suffered as a consequence of the retrenchment of the public sector and the insufficient response of the private sector to the opening up of infrastructure industries to private participation in...

Money targeting (MT) was a highly popular monetary regime among central banks in both industrial and developing countries during the 1980s and 1990s. This paper presents a comprehensive empirical exploration of the possible explanations of why countries choose (and abandon) a MT regime. The...