Bond flows to Less Developed Countries (LDCs) proved more resilient than expected to the rising U.S. interest rates during 1994, raising hopes that the current episode of private capital flows to LDCs may not end in a widespread crisis as its predecessors in the 1920s and 1970s did. This paper...

When the error correction term exhibits persistence, its change may convey useful information about short-run economic dynamics, which, if not taken sufficiently into account by a forecasting model, could be associated with predictable forecast errors. Such errors are documented in the DRI...

The return of private capital to highly indebted less-developed countries (LDCs) in the late 1980s was accompanied by widening current account deficits in the recipient countries, which were primarily attributed to a consumption boom in Latin America and an investment surge in East Asia....

Reflecting the nature of economic decisions, the error correction mechanism (ECM) in the error-correction representation of a system of co-integrated variables may arise from forward-looking behavior. In such a case, the estimated ECM coefficients may misleadingly appear to be insignificant or...