This paper analyzes the macroeconomic effects of fiscal and labor market policies in developing countries. The basic framework considers a small open economy with a large informal production sector and a heterogeneous work force. The labor market is segmented as a result of efficiency...

This paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries. Overall, empirical results support precautionary motives; in particular, a more liberal capital account regime increases international reserves....

Are countries with unregulated capital flows more vulnerable to currency crises? Efforts to answer this question properly must control for "self selection" bias since countries with liberalized capital accounts may also have more sound economic policies and institutions that make them less...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...