The aim of this article is to assess whether a fiscal sustainability indicator (FSI) can be used as an early warning indicator for predicting the probability that a currency crisis occurs. Using the FSI developed by Croce and Juan-Ramón (2003) and two different definitions of currency crisis, a...

Accurate modeling of extreme price changes is vital to financial risk management. We examine the small sample properties of adaptive tail index estimators under the class of student-t marginal distribution functions including GARCH and propose a model-based bias-corrected estimation approach....

Improvements in macroeconomic conditions are encouraging, and the current macroeconomic framework for 2006 and 2007 remains valid in Paraguay. The strong fiscal performance has applied also to the rest of the public sector. The authorities have submitted a budget proposal for 2007 that preserves...

Uruguay has experienced a remarkable recovery since the 2002 crisis, supported by sound policies and favorable external conditions. With the framework put in place in 2002, Uruguay abandoned an exchange rate peg in favor of a free float, adoped a monetary regime initially based on money targets,...

This paper develops a simple model of an international lender of last resort (ILOLR). The world economy consists of many open economies, each with a banking system and a central bank operating under a pegged exchange rate regime. The fragility of the banking system and the limited ability of a...

This paper takes stock of the current state of development of the financial systems in five Central European transition economies (the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia) that are also leading EU accession candidates. It presents both a progress report and an...

This paper reviews trends in bank lending to the private sector, with a particular focus on Central and Eastern European countries, and finds that rapid growth of private sector credit continues to be a key challenge for most of these countries. The paper discusses possible implications for...

This paper suggests a strategy designed to make best use of the available quantitative techniques of financial sector assessment. It incorporates early warning systems, financial sector forecasts, stress tests for systemically important financial institutions, interbank contagion analysis, and...

This paper reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards. It finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike. Pouring...