Interest rate derivatives on major currencies, with notional outstanding amounts adding up to hundreds of trillions, are mostly indexed on Libor and Euribor benchmarks, as are hundreds of billions in loans to enterprises, mortgages and other retail loans to the real economy. Yet, the prevailing...

We test and estimate a variety of alternative models of the yield curve, using weekly, high-quality U.K. data. We extend the Campbell-Shiller technique to the overlapping data case and apply it to reject the pure expectations hypothesis under rational expectations. We also find that risk...

Interest rate caps, despite their intended objective of broadening financial inclusion, can have undesirable effects on financial inclusion under certain conditions. This paper examines the effect of microfinance-loan interest rate caps on financial inclusion in Cambodia. Based on a...

This paper analyzes the price stabilizing properties of puttable and extendible bonds, their potential to help develop interest-rate derivative markets, and their use by governments. Their stabilizing properties imply that, when bond prices fall, prices for puttable and extendible bonds fall by...

This paper documents the specification of a model that was constructed to assess debt sustainability in emerging market economies. Key features of the model include external and fiscal sectors, which allow assessment of external and public debt in a unified framework; public and external debt,...

Most developing country debt is denominated in U.S. dollars and has a floating interest rate. The pricing of floating rate debt and related interest rate options are examined in this paper. Formulas for pricing ceilings and floors on floating rate debt are derived for several different models of...

VAR methods suggest that the monetary transmission mechanism may be weak and unreliable in low-income countries (LICs). But are structural VARs identified via short-run restrictions capable of detecting a transmission mechanism when one exists, under research conditions typical of these...

This paper estimates insurance requirements against natural disasters (NDs) in the Eastern Caribbean Currency Union (ECCU) using an insurance layering framework. The layers include a government saving fund, as well as market instruments. Each layer is calibrated to cover estimated fiscal cost of...

This paper quantifies the savings obtained from risk pooling with a Regional Stabilization Fund (RSF) for the Eastern Caribbean Currency Union. A Monte Carlo experiment is used to estimate the size of a RSF conditional on probabilities of depletion under specific saving-withdrawal rules. Results...