Credit constraints that link a private agent's debt to market-determined prices create a systemic credit externality that drives a wedge between competitive and (constrained) socially optimal equilibria, which induces private agents to "overborrow". We quantify the effects of this externality in...

Financial globalization had a rocky start in emerging economies hit by Sudden Stops. Foreign reserves have grown very rapidly since then, as if those countries were practicing a New Mercantilism that views foreign reserves as a war-chest for defense against Sudden Stops. This paper conducts a...

This paper analyzes the macroeconomic implications of real-indexed bonds, indexed to the terms of trade or GDP, using a general equilibrium model of a small open economy with financial frictions. Although indexed bonds provide a hedge to income fluctuations and can thereby mitigate the effects...

This paper proposes a new approach to EMU governance and integration consisting of the following elements: (i) an optimal use of the existing EU institutional framework for economic, fiscal and financial policies is necessary and possible at each level of EMU integration that is politically...

This paper, drawing on the lessons from the sovereign debt crisis, tries to give answers to some key questions: Was the strategy and specific actions to cope with the crisis appropriate? Was the priority given to preserving financial stability justified? Are stability and growth objectives...

This paper, after reviewing briefly the early steps of European monetary integration and key elements of the EMU project as reflected in the Treaty of Maastricht, analyses the monetary integration strategy and convergence experience of member states, in particular that of Greece, in the 1990s...

We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies. Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock with non-recursive identifying restrictions. We estimate strong and robust macroeconomic...

Abstract I consider a small open economy model where international financial markets are imperfect and the exchange rate is determined by capital flows. I use this framework to study the effects of portfolio flow shocks, derive the optimal foreign exchange intervention policy, and...

We study international spillover effects of US monetary policy. We use monthly panel data from fifteen major emerging market economies (EMEs), in a period where the countries have a flexible exchange rate regime and are integrated into global financial markets. We show that US monetary policy...

We consider how fear of model misspecification on the part of the planner and/or the households affects welfare gains from optimal macroprudential taxes in an economy with occasionally binding collateral constraints as in Bianchi (2011). On the one hand, there exist welfare gains from...