Few would dispute that sovereign defaults entail significant economic costs, including, most notably, important output losses. However, most of the evidence supporting this conventional wisdom, based on annual observations, suffers from serious measurement and identification problems. To address...

The cost of holding international reserves to self insure against foreign currency liquidity runs is typically estimated as the sovereign spread on the risk-free return on reserves paid on the debt issued to purchase them. However, to the extent that reserves lower the probability of a...

In this paper, we introduce the first comprehensive database on sovereign debt systematically compiled to ensure comparability, for all countries in the Americas, and use this new data to highlight the main stylized facts regarding sovereign debt for developing America in the last two decades....

This paper shows that a large fraction of the variability of emerging market bond spreads is explained by the evolution of global factors such as risk appetite (as reflected in the spread of high yield corporate bonds in developed markets), global liquidity (measured by the international...

This paper explores sources of deposit dollarization unrelated to standard moral hazard arguments. We develop a model in which banks choose the optimal currency composition of their liabilities. We argue that the equal treatment of peso and dollar claims in the event of bank default can induce...

This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by...

In this paper, we examine how the presence of country insurance schemes affects policymakers' incentives to undertake reforms. Such schemes (especially when made contingent on negative external shocks) are more likely to foster than to delay reform in crisis-prone volatile economies. The...

This paper surveys the theoretical and empirical literature on the role of state-owned banks and also presents some new results and a robustness analysis. After having discussed whether there is a theoretical justification for the presence of state-owned banks, the paper focuses on their...

In this paper, we show that a central bank, by announcing and committing ex-ante to a bailout policy that is contingent on the realization of certain states of nature (for instance on the occurrence of an adverse macroeconomic shock), creates a risk-reducing quot;value effectquot; that more than...

To cope with the self-fulfilling liquidity runs that have triggered many recent financial crises, we propose the creation of a country insurance facility. The facility, which we envisage as complementary to the existing multilateral lending facilities, would provide eligible countries with...