Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a...

Many private infrastructure projects mix regulation that subjects the private company to considerable risk, a government or regulator that is reluctant to see the company go bankrupt, and high leverage on the part of the company. If all goes well, equityholders make a profit, debtholders are...

This paper examines the extent of consumption risk sharing for a group of 50 high-income and developing countries. The analysis is based on the empirical implementation of a model of partial consumption insurance whose parameters have the natural interpretation of coefficients of partial risk...

Deepening real and financial integration of developing countries into the world economy has prompted renewed interest in the contribution of external shocks to their macroeconomic fluctuations. This paper revisits the issue using four decades of annual data for a large sample of developing...

A considerable literature has focused on the determinants of total factor productivity (TFP), prompted by the empirical finding that TFP accounts for the bulk of long-term growth. This paper offers a deeper reason for such focus: the welfare of a representative consumer is summarized by current...

This paper explores empirically the role of risk and return in the observed evolution of net foreign asset positions of industrial and developing economies. The paper adopts a dynamic approach in which investors' portfolios adjust gradually to their long-run equilibrium, defined by a standard...

The authors analyze the unparalleled increase in foreign direct investment to emerging market economies in the past 25 years. Using a large cross-country time-series data set, the authors evaluate the dependence of foreign direct investment on global factors or worldwide sources of risk (that...

The Argentine crisis has been variously blamed on fiscal imbalances, real overvaluation, and self-fulfilling investor pessimism triggering a capital flow reversal. The authors provide an encompassing assessment of the role of these and other ingredients in the recent macroeconomic collapse. They...

Credibility and transparency are at the core of the current debate about exchange rate regimes. The steady growth in the magnitude and variability of international capital flows has complicated the question of whether to use floating, fixed, or intermediate exchange rate regimes. Emerging market...

For reason of empirical tractability, analysis of cointegrated economic time series is often developed in a partial setting, in which a subset of variables is explicitly modeled conditional on the rest. This approach yields valid inference only if the conditioning variables are weakly exogenous...