The global financial crisis of 2007-2009 spread through different channels from its origin in the United States to large parts of the world. In this paper we explore the financial and the trade channel in a unified framework and quantify their relative importance for this transmission....

We explore the role of financial openness – capital account openness and gross capital inflows – and a newly constructed gravity-based contagion index to assess the importance of these factors in the run-up to currency crises. Using a quarterly data set of 46 advanced and emerging market...

Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the...

Certain growth-promoting policies can have negative side-effects by increasing the vulnerability of economies to financial crises. Typical examples are greater openness to financial flows or more liberalised financial markets. This paper investigates whether the growth benefits of policy reforms...

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...

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...

We explore the role of ‘dollar shortage' shocks and central bank swap lines in a two-country New Keynesian model with financial frictions. Domestic banks issue both domestic and foreign currency debt and lend in domestic currency. Foreign currency-specific funding shocks, which are amplified...

Our study extends on conventional measures of contagion defined as a marked increase of cross-market correlation by directly investigating changing causality pattern by using the Granger-causality methodology. Our results show that the Asian crisis first established new and changed causality...

This paper reviews some of the current debates on the reform of the international monetary system. Despite its deficiencies, the United States (US) dollar will remain the dominant currency and Special Drawing Rights (SDR) cannot serve as either an international medium of exchange or a reserve...

To the extent that financial contagion from the United States and the euro area crisis has occurred in Asia, this paper focuses on the importance of strengthening the regional financial safety nets. By conjecturing that efforts to prevent and manage a crisis are the essence of providing such...