This article describes a model of financial crisis and explores its implications for public policy. The framework nests the key features of earlier models but is better able to address international architecture questions in a welfare setting. In particular, this framework is used to assess the...

This paper develops a network model of interbank lending in which unsecured claims, repo activity and shocks to the haircuts applied to collateral assume centre stage. We show how systemic liquidity crises of the kind associated with the interbank market collapse of 2007–2008 can arise within...

This paper presents some more evidence on the empirical regularity known as `45-degree rule'. We estimate income and price elasticities of trade for 21 countries in a cointegration framework. More specifically, we adopt the autoregressive distributed lag (ARDL) approach and the DOLS procedure to...

The paper surveys the literature that combines growth and trade into models of North-South interaction. We distinguish two strands of growth theory: Old (exogenous) and new (endogenous) growth. We also distinguish old trade theory which assumes constant returns to scale and perfect competition,...

This paper reviews the theory of balance-of-payments crises, and its implications for identifying potential leading indicators of crises. It discusses and evaluates three different empirical approaches to balance-of-payments crises: The signalling, discrete-choice, and structural approaches....