We investigate the relationship between a country's domestic financial development and the (composition of its) net foreign asset position using a pooled mean group estimator and data for 51 countries during the period 1970-2007. The results show that financial development reduces a country's...

This paper studies the impact of explicit deposit insurance on market discipline in a framework that resembles a natural experiment. We improve upon previous studies by exploiting a unique combination of country-specific circumstances, design features, and data availability that allows us to...

This study is an introduction to and summary of the 2002 Annual Meeting papers of the Royal Netherlands Economic Association. The general theme of this year's Annual Meeting is 'The role of wealth in the economy'. It is covered by 5 papers, which address the following topics: (i) household...

Using data for 17 OECD countries from 1983 to 2003, this paper establishes a non-linear relationship between private consumption and the level of government debt. In countries with a high level of government debt, a fiscal expansion is partly crowded out by a fall in private consumption. In...

We explore the international spillovers from fiscal policy shocks via trade in Europe. A fiscal expansion stimulates domestic activity, which leads to more foreign exports and, hence, higher foreign output. To quantify this, we combine a panel VAR model in government spending, net taxes and GDP...

This paper examines the interaction of real exchange rates and current account movements in open economies subject to monopolistic competition with sticky price-setting behavior and distortionary taxes. We find that the correlations between fiscal balances and the current account depend on the...

The purpose of this Research Memorandum is to assess whether concepts from psychological theory may be useful in explaining herding and crises in financial markets. The conclusion is that the theory of cognitive dissonance, which assumes that the human brain seeks and processes information in a...

We show that, complementary to trade and financial linkages, the strength of the banking sector helps explain the transmission of currency crises. Specifically, we demonstrate that the Mexican, Thai, and Russian crises predominantly spread to countries with weaknesses in their banking sectors....

d above may also more fully apply to the Thai case, since the experience of the other countries in the region is probably tainted by contagion effects of the Thai baht crisis (Baig and Goldfajn 1999).

In this report we examine time-varying correlations of asset returns using the Dynamic Conditional Correlation (DCC) models, recently proposed by Engle (2002), that are estimated by a two-step procedure. First, we conclude that correlations vary considerably over time. Secondly, the conditional...