This paper develops a real model of financial crisis, and uses it to elucidate the controversy between Joe Stiglitz and the IMF concerning the Asian financial crisis. Borrowers of foreign capital are bound by lending contracts to pay the world rate of return on their borrowing, following an...

We consider an experimental setting where traders in stock markets or exchange rate markets receive one stylized piece of information at a time about the value of an asset. We find that having limited knowledge about the prior distribution of true asset values does not hamper the decision making...

We analyse the determinants of Australia’s exchange rate in terms of the approach introduced by Williamson (1983), based on the simultaneous attainment of internal and external balance. Internal balance implies that the economy is operating at its supply potential with no inflationary...

Australia’s manufactured exports have grown rapidly since the mid-1980s. The growth of Australia’s trading partners and the overall depreciation of the exchange rate, while important, do not fully explain this growth. This paper seeks to explain the remaining growth in reference to firms’...

Financial regulators perform inter alia a quality control function, as they search for recession-generating flaws in the financial system. Some groupings of regulations operate more or less independently to other groupings, as is the case when different agents – not necessarily different...

A puzzle from the Great Recession is an apparent mismatch between a fall in the persistence of European inflation rates, and the increased variability of expert forecasts of inflation. We explain this puzzle and show how country specific beliefs about inflation are still quite close to the...

The departure of a factor in excess supply in the non-traded sector leads to a real appreciation, in a setup that combines the canonical Lewis Model (Lewis, 1954, and Fei and Ranis, 1961, 1964) with a Balassa-Samuelson traded/non-traded dichotomy (Obstfeld and Rogoff, 1996). China is a potential...

Many important regulatory decisions are taken by professionals employing limited and conflicting evidence. We conduct an experiment in a merger regulation setting, identifying the role of different standards of proof, volumes of evidence, cost of error and professional or lay decision making....

We consider an experimental setting where traders in stock markets or exchange rate markets receive one stylized piece of information at a time about the value of an asset. We find that having limited knowledge about the prior distribution of true asset values does not hamper the decision making...