Interest-rate spreads fluctuate widely across time and countries. We characterize their behavior using some 3,200 quarterly observations for 21 advanced and 17 emerging economies since the early 1990s. Before the financial crisis, spreads are 10 times more volatile in emerging economies than in...

In the present paper, we develop a two-sector general equilibrium model of a small open economy to explore the transmission mechanisms of external financial shocks. In particular, we use a cash-in-advance model with limited participation augmented with a financial friction in the form of a...

This paper studies the effect of implementing fiscal rules on sovereign default risk and on the probability of large capital ow reversals for a large sample of countries including both developed and emerging market economies. Results indicate that fiscal rules are beneficial for macroeconomic...

This paper aims to illustrate how a Mixed-Cross-Section Global Vector Autoregressive (MCS-GVAR) model can be set up and solved for the purpose of forecasting and scenario simulation. The application involves two cross-sections: sovereigns and banks for which we model their credit default swap...

Interest-rate spreads fluctuate widely across time and countries. We illustrate this on the basis of about 3,100 quarterly observations for 21 advanced and 17 emerging economies since the early 1990s. Prior to the financial crisis, spread fluctuations in advanced economies are an order of...

Although internal policy mismanagements can be cited in most recent emerging market crises, they seldom account fully for the severity of these crises. The reluctance of international investors to provide the resources that would limit the extent of the reversal almost invariably plays a key...