This paper uses binary classification trees (BCTs) to predict capital account crises. BCTs successively compare candidate variables and thresholds to split the data into two subsamples, allowing for a large number of indicators to be considered and complex interactions to emerge in a way that...

The paper shows that common fiscal rules, such as a limit to the deficit-output ratio, induce an “escape clause”–type fiscal policy, similar to that studied for monetary policy by Flood and Isard (1988 and 1989) and Lohmann (1992): The government resorts to an active stabilization (for...

When inflation rates in a country are persistently high, observers often believe that the inflation process has become "inertial," posing an obstacle to disinflation. Using an innovative approach, we assess the empirical validity of this argument for the case of Turkey. We find that the current...

Latin American countries have experienced cycles of expansionary policies, currency appreciation, and crises. The popularity of appreciations, through their effect on consumers' purchasing power, has been an accepted assumption in the literature despite a dearth of studies on the distributional...