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This paper develops a two-country model in which transmission of financial shocks arises despite a flexible exchange rate regime and substitutable financial assets, contrary to the open-economy literature results under these two conditions. The search and matching approach first accounts for the...
Persistent link: https://www.econbiz.de/10012967228
I propose a unified model of domestic bank runs, sovereign debt issuance and international reserve accumulation. Banking fragility gives rise to endogenous costs of default that support sovereign debt capacity. It additionally brings about a financial stabilization role for international...
Persistent link: https://www.econbiz.de/10012947841
I propose a unified model of domestic bank runs, sovereign debt issuance and international reserve accumulation. Banking fragility gives rise to endogenous costs of default that support sovereign debt capacity. It additionally brings about a financial stabilization role for international...
Persistent link: https://www.econbiz.de/10012951977
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...
Persistent link: https://www.econbiz.de/10013226440
We provide an overview of the recent developments of the literature on the determinants of long-term capital flows, global imbalances, and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown...
Persistent link: https://www.econbiz.de/10014025376
The world has become more interconnected over the past few decades. Against this backdrop, economic and financial contagion following adverse shocks can have a severe impact on the global economy. How systemic can the effects of contagion be? What specific transmission channels are involved?...
Persistent link: https://www.econbiz.de/10013491953
A modification to the Foley (2003) model is presented here introducing the role of exchange rate and foreign currency denominated debt in order to determine their influence on financial fragility, using the financial instability hypothesis of Hyman Minsky under flexible exchange rate regime....
Persistent link: https://www.econbiz.de/10013103280
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...
Persistent link: https://www.econbiz.de/10013065790
This paper builds upon the model of Kaminsky and Reinhart (1999) and extends it to triplecrises. It applies a new visualisation approach combining elements of an event study analysis and a fan chart technique. This approach illustrates the deviation of fundamentals in the runup to...
Persistent link: https://www.econbiz.de/10010196950
Financial crises in emerging economies in the 1980s and 1990s often entailed abrupt declines in foreign capital inflows, improvements in trade balance, and large declines in output and total factor productivity (TFP). This paper develops a two-sector small open economy model wherein...
Persistent link: https://www.econbiz.de/10010426139