Emerging markets (sometimes endowed with fertile pampas) have limited access to world capital markets and suffer from original sin: they cannot borrow in their own currency. Does this mean that monetary and exchange rate policy has non-standard effects in such countries? We develop a simple...

We build a model of financial sector illiquidity in an open economy. Illiquidity defined as a situation in which a country's consolidated financial system has potential short-term obligations in foreign currency that exceed the amount of foreign currency it can have access to on short notice can...

We build a model of financial sector illiquidity in an open economy. Illiquidity is defined as a situation in which a country's consolidated financial system has potential short-term obligations that exceed the amount of foreign currency available on short notice. We show that illiquidity is key...