This paper analyzes the causes and implications of recent financial crises. Financial crises in general lead to changes in both theory and practice of economics. The paper takes an historical overview. The global consensus of economic theory during the 20th century is discussed. The paper...

The last few years have seen a significant re-evaluation of the models used to analyze crises in emerging markets. Recent models typically stress financial constraints or distorted financial incentives. While this certainly represents progress, these models share a weakness with the earlier...

The last few years have seen a significant re-evaluation of the models used to analyze crises in emerging markets. Recent models typically stress financial constraints or distorted financial incentives. While this certainly represents progress, these models share a weakness with the earlier...

We propose that policymakers responding to novel contingencies are subject to first-mover disadvantage. Like innovation in the private sector, developing effective solutions to novel policy problems requires a messy process of discovery, experimentation, and repeated failure. Much as...

It is well known fact that all good things, as also bad things, come to an end and business cycles pass through good and bad economic times. Economically 2010 was a year of transition from economic recession to recovery. Economies were improving in some countries and industries were showing...

Through the euro area crisis, financial fragmentation across jurisdictions became a prime concern for the single monetary policy. The ECB broadened the scope of its instruments and enacted a series of non-standard measures to engineer an appropriate degree of policy accommodation. The...

Firms in emerging markets are exposed to severe financial frictions and credit constraints, that are exacerbated by the sudden stop of capital inflows. Can monetary policy offset this external credit squeeze? We show that although this may be the case during moderate contractions (or in partial...

In this paper we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy. After the shock of the Global Financial Crisis (GFC), India’s economy did not dip much due to the well-directed fiscal stimulus...

I study a two-country version of the banking model with financial markets developed in Allen and Gale (2004). Similar to their model, two types of banks arise endogenously in an autarkic economy: some always remain solvent and others can default. When the financial markets are integrated, three...

We develop a model of gross capital flows and analyze their role in global financial stability. In our model, consistent with the data, when a country experiences asset fire sales, foreign investments exit (fickleness) while domestic investments abroad return home (retrenchment). When countries...