The carry trade strategy involves selling forward currencies that are at a forward premium and buying forward currencies that are at a forward discount. We compare the payoffs to the carry trade applied to two different portfolios. The first portfolio consists exclusively of developed country...

The distributional effects of the minimum wage are analysed in a model where skilled and unskilled labour enter the production function. It is argued that distributional goals are best achieved by letting the labour market clear and achieving redistribution through taxes and transfers.

When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor when. Eventually, in 2005 after a delay of more than three years, a supermajority of creditors...

The Balassa-Samuelson model, which explains real exchange rate movements in terms of sectoral productivities, rests on two components. First, the model implies that the relative price of non-traded goods in each country should reflect the relative productivity of labour in the traded and...

This paper offers a new insight into real exchange rate behaviour in Latin America. Using quarterly data over the sample period 1973Q2-2005Q4, the analysis indicates that the real exchange rates of Argentina, Brazil and Venezuala can be described as non-linear trend stationary processes. This...

Data show that better creditor protection is correlated across countries with lower average stock market volatility. Moreover, countries with better creditor protection are observed to have suffered lower decline in their stock market indexes during the current financial crisis. To explain this...

This study reviews broadly the experience of the last decade on crisis prevention and management. It seeks to draw greater attention to policy decisions that are made during the phase when capital inflows come to a sudden stop. Procrastination---the period of financing a balance of payments...

Literature on capital flows identifies various channels through which capital inflows could create financial fragility and economic instability in “developing and emerging economies.†Domestic credit expansion is one such channel. Capital inflows can lead to rapid expansion of domestic...

This article investigates the exchange-rate exposure of S&P CNX 500 non-financial constituents during 2006–2011. By using a standard two-factor market model, we measure the sensitivity of stock returns to changes in the exchange rate and find that 11 per cent of sample firms are...

This paper investigates the currency regime choices of six Southeast Asian (SEA) countries, namely Indonesia, Korea, Malaysia, Philippines, Singapore and Thailand, for the period 1973-99 from the perspectives of optimum currency area (OCA), macroeconomic stabilization and currency crisis. Regime...