This paper analyzes the role of capital market imperfections for investment decisions, and investigates whether the financial reforms introduced in the 1980s have succeeded in relaxing financial constraints. The estimated equations do not provide evidence that financial reform in Ecuador has...

Currency risk is one of the two components of the total interest rate differential. Hard pegs, such as currency boards, are meant to reduce or even eliminate currency risk, thus reducing domestic interest rates. This paper investigates the patterns and determinants of the currency risk premium...