This paper describes the anatomy of two types of balance-sheet macroeconomic crises. Conventional balance-sheet crises are triggered by external imbalances and balance sheet vulnerabilities. They typically occur after capital inflows have led to a substantial build up of foreign currency...

Most papers explaining the macro causes of the U.S. Great Recession focus on the behavior of the middle class: how its saving rate declined in the pre-crisis years, then surged following the crisis. This paper argues that the saving rate of the rich followed a similar pattern, the result of...

Emerging Europe was particularly hard hit by the global financial crisis, but a concerted effort by local policymakers and the international community staved off impending financial meltdown and laid the foundations for renewed convergence with western Europe. This book, written by staff of the...

The economic literature has long attributed non-zero expected excess returns in currency markets to time-varying risk premiums demanded by risk-averse investors. This paper, building on Bacchetta and van Wincoop's (2021) portfolio balance framework, shows that such returns can also arise when...

This paper addresses a key puzzle in international finance: whether exchange rates follow a random walk or exhibit predictable patterns. We demonstrate that exchange rates can possess a unit root while maintaining substantial predictability over certain horizons. Our model combines a stochastic...

In the last few decades there has been little convergence of income levels in Latin America with those in the United States, in sharp contrast with both emerging Asia and emerging Europe. This paper argues that lack of convergence was not the result of low investment. Latin America is poorer...

In the last decade, over half of the EU countries in the euro area or with currenciespegged to the euro were hit by large risk premium shocks. Previous papers havefocused on the impact of these shocks on demand. This paper, by contrast, focuses onthe impact on supply. We show that risk premium...

In the past decade, most of the EU New Member States experienced a severe credit-boom bust cycle. This paper argues that the credit boom-bust cycle was to a large extent the result of factors external to the region (“bad luck�). Rapid credit growth followed from a high liquidity in...

This paper argues that the large differences among EU countries in post-crisis employment performance are to a large extent driven by the need to adjust corporate balance sheets, which had greatly deteriorated during the boom years in some countries but not in others. To close the large gaps...

This paper describes the anatomy of two types of balance-sheet macroeconomic crises. Conventional balance-sheet crises are triggered by external imbalances and balance sheet vulnerabilities. They typically occur after capital inflows have led to a substantial build up of foreign currency...