Since the start of the 1990s, several countries have abandoned fixed- but-adjustable exchange rate regimes. The tendency towards floating exchange rate regimes, or alternatively monetary unions, has given rise to a debate on the disappearance of pure currency crises, and the literature has...

Fundamental sources of the Russian financial crisis in 1998 are discussed. Focus is made on the time horizon of judgements concerning sustainability of the economic policy. It is argued that the macroeconomic policy pursued by the monetary authorities was not robust in a medium run, but, in the...

The paper studies the ways an economy working under a currency board could adjust when capital inflows stop suddenly. Six alternative solutions to restore the economic equilibrium are available when the sudden stop comes: a recession could push the prices of non-tradable goods down, a...

Purchasing power parity (PPP) hypothesis has attracted a lot of attention from academics and policy-makers particularly, during the recent float. Most previous studies used data from the developed world. This study examines the validity of the PPP hypothesis using data during the recent float...

In the literature, little role is attributed to the country risk conditional volatility in the determination of the macroeconomic equilibrium in a developing small open economy (DSOE). This paper posits the prime hypothesis that, in the presence of multiple equilibria and self-fulfilling...

Upon winning the 2002 presidential elections, event that considerably increased the Brazilian country risk levels and volatility, Lula celebrated by declaring: “hope has beaten fear”. Extending Une and Portugal (2004), the aim of this paper is twofold: to empirically test the interrelations...

Evidence on international capital flows suggests that foreign direct investment (FDI) is less volatile than other financial flows. To explain this finding, I model international capital flows under the assumptions of imperfect enforcement of financial contracts and inalienability of FDI....

Currency and financial crises are determinants of growth and development, mainly in developing countries subject to shocks, contagion and volatility. A relevant issue when trying to do the implementation of development policies is to anticipate or forecast the occurrence of currency crises that...

Exchange-rate-based stabilisations, even if successful, usually lack credibility initially. This is reflected in high (ex post) real interest rates and some degree of real exchange rate appreciation. Empirical observation suggests that wage inflation declines smoothly over time whilst interest...