This paper builds upon the existing empirical literature on the factors behind financial stability, focusing on the role of monetary policy design. In particular, it analyzes a sample of 79 countries in the period 1970 to 1999 to evaluate the effect of the choice of the central bank objectives...

The fallout from the 2008 financial crisis has been particularly acute in the euro area Member States of the south-western rim and in the new EU Member States, due to their previously accumulated macroeconomic and financial imbalances. The perception that the euro environment provided a solid...

This paper investigates empirically whether there is a negative relationship between a country's risk premium and the balance sheet effect, as implied by recent theories emphasizing financial imperfections. We find evidence that balance sheet effects, stemming from the increase in the external...

This paper builds upon the empirical literature on the macroeconomic impact of real exchange rate depreciations for a sample of 27 emerging economies. We find that real exchange rate depreciations tend to increase a country's risk premium. This effect is neither linear nor symmetric: large real...

Emerging economies with inflation targets (IT) face a dilemma between fulfilling the theoretical conditions of "strict IT", which imply a fully flexible exchange rate, or applying a "flexible IT", which entails a de facto managed floating exchange rate with FX interventions to moderate exchange...