Monetary arrangements in Europe vacillated wildly over the last decade, and they may be expected to continue to do so over the next. The literature on this chaotic process has focused on issues of credibility. Here, we focus instead on the longer-run implications of Europe's choice of monetary...

Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves....

Using industry-level data, this paper shows that the European transition region benefited much more strongly from financial integration in terms of economic growth than other developing countries in the years preceding the current crisis. We analyze several factors that may explain this finding:...

This study shows that Target2 net claims are a poor measure of Bundesbank loss exposure, and even more so of German loss exposure to the rest of the Eurozone. This is true even under plausible assumptions about a comprehensive break-up scenario that leaves Germany as the only member of the euro...

Stanley Fischer is a rarity among economic policymakers. He came to the policy world as an internationally recognized intellectual leader on macroeconomic theory and policy. He confronted numerous emerging market crises, including the globally systemic Asian crisis, as the IMF’s First Deputy...

Do global current account imbalances still matter in a world of deep international financial markets where gross two-way financial flows often dwarf the net flows measured in the current account? Contrary to a complete markets or 'consenting adults' view of the world, large current account...

Greater financial integration between core and peripheral EMU members had an effect on both sets of countries. Lower interest rates allowed peripheral countries to run bigger deficits, which inflated their economies by allowing credit booms. Core EMU countries took on extra foreign leverage to...

This paper is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation of...

In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the Financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,...

This paper presents a model of financial resource curse, i.e. episodes of abundant access to foreign capital coupled with weak productivity growth. We study a two-sector, tradable and non-tradable, small open economy. The tradable sector is the engine of growth, and productivity growth is...