A general feature of national fiscal systems is that they provide buffers against regional fluctuations in output and employment by redistributing income between the different regions of a country. Recent literature in connection with European monetary integration has stressed the insurance...

Does a monetary union need fiscal shock absorbers helping the participating countries to cope with asymmetric shocks? The consensus in the debate over EMU argues that the answer is yes. In this paper, we revisit the issue, building on a dynamic, general equilibrium framework of regions in a...

We develop a model of a small open economy with credit market frictions of the Holmstrom-Tirole type to analyze the consequences of capital account liberalization. We show that financial opening facilitates the inflows of cheap foreign funds and improves production efficiency. Reforms increasing...

This paper investigates the role of exchange rate regime choices in the determination of capital controls in transition economies. We first use a simultaneous equations model to allow direct interactions between decisions on capital controls and on exchange rate regimes. We find that exchange...

Despite the fact that banks in Central Europe are burdened by extraordinarily high bad loan ratios, the recent financial crisis in South East Asia and Russia, has not led to a massive failure of banks in the region. In this paper, we study economic trends and policies that may have helped to...

This paper analyses the choices of exchange rate regimes in developing countries since 1980. Static and dynamic random-effects multinominal panel models are estimated using simulation-based techniques. Explanatory variables include OCA fundamentals, stabilization considerations, currency crises...

This paper provides a study of bond yield differentials among EU eurobonds issued between 1991 and 2002. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premia which increase with the debt, deficit and debt-service ratio and depend positively on...