In this paper the author empirically examines whether the influence of bilateral investment treaties' political risk guarantees extends to other types of capital flows - FDI, private debt, public debt and portfolio equity. The paper uses panel data on middle and low income countries during the...

We construct a model of FDI, risk and aid, where a country loses access to FDI and aid if the country expropriates FDI. We show that: (i) The threat of expropriation leads to under-investment; (ii) The optimal level of FDI decreases as the risk of expropriation rises; and (iii) Under certain...

Historically, sovereign debt in local currency has been considered safer than debt in foreign currency. Yet the literature offers scant theoretical or empirical guidance as to why such a gap exists, or why it appears to have slowly and steadily diminished for all regions over the past two...

A critical question faced by any sovereign seeking to raise funds in the bond market is whether to issue the debt under foreign or local parameters. This choice determines other key characteristics of any bond issue such as which banks, lawyers, and investors will be involved. Most important...

Over recent years, several euro area countries have registered large and persistent net foreign liabilities. This paper examines the risks arising from these external stock imbalances, the prospects for their smooth unwinding and the menu of policy options. The paper demonstrates that external...

Evidence on international capital flows suggests that foreign direct investment (FDI) is less volatile than other financial flows. To explain this finding, I model international capital flows under the assumptions of imperfect enforcement of financial contracts and inalienability of FDI....

The lack of a supra-national legal authority that can enforce private contracts across borders makes debt repayment in an international setting contingent on borrowers' willingness to pay rather than ability to pay. This market failure (i.e., inadequate enforcement) causes investment to fall...

The lack of a supra-national legal authority that can enforce private contracts across borders makes debt repayment in an international setting contingent on borrowers' willingness to pay rather than ability to pay. This market failure (i.e., inadequate enforcement) causes investment to fall...

This paper examines two major risks to foreign investors: default on sovereign debt and expropriation of foreign direct investment, which we refer to collectively as "sovereign theft." Using a series of formal models, we analyze how the incentives to engage in sovereign theft vary with the state...

In this paper I explore the role of portfolio diversification in explaining the distribution of foreign investment across countries. I capture the portfolio diversification motive by a measure of country-specific riskiness, “covariance risk,” which I construct as how countries' growth rates...