Search Results
Working Paper
Speculative capital inflows and exchange rate targeting in the Pacific Basin
This paper studies the process of capital inflow management and speculative inflows for countries pursuing the joint goals of monetary and exchange rate management. We introduce a sticky-price model with imperfect asset substitutability in which a central bank engages in costly sterilization to mitigate the influence of capital inflows on its policy targets. The costs of sterilization, often referred to as "quasi-fiscal costs" in the literature, reflect the loss experienced by the central bank by holding foreign securities whose nominal yields are inferior to those paid on domestic bonds. ...
Working Paper
Sterilization costs and exchange rate targeting
This paper examines the movements of exchange rates and capital flows in an environment where an optimizing central bank pursuing the joint goals of inflation and output targeting engages in costly sterilization activities. Our results predict that when faced with increased sterilization costs, the central bank will choose to limit its sterilization activities allowing target variables, such as the nominal exchange rate, to adjust. ; We then test the predictions of a linearized version of the saddle-path solution to the model for a cross-country panel of developing countries. We use IV, GMM ...
Journal Article
Resolving sovereign debt crises with collective action clauses
Working Paper
Crisis resolution: next steps
At the April 2003 meeting of the International Monetary and Financial Committees, it was decided to further encourage the contractual approach to smoothing the process of sovereign debt restructuring by encouraging the more widespread use of collective action clauses (CACs) in international bonds. This decision was shaped partly by Mexico's successful launch of a bond subject to New York law but featuring CACs, and by subsequent issues with similar provisions from other emerging market countries. This paper reviews the developments leading up to that event, its implications, and prospects ...
Working Paper
Monetary union and macroeconomic stabilization
Conference Paper
Financial intermediation, agency and collateral and the dynamics of banking crises: theory and evidence for the Japanese banking crisis
We outline a model of an endogenously evolving banking crisis in a growing economy subject to either idiosyncratic or aggregate productivity shocks. The model incorporates agency problems at two levels: between firms and their banks and between banks and the banks? depositors and deposit insurers. In equilibrium, banks have an incentive to renegotiate loans to insolvent firms, leading to an increasing contingent liability of the government with deposit insurance and regulatory forbearance. The growth rate of output is endogenous, and we explain how the agency problems affect the qualitative ...
Working Paper
Financial intermediation, agency, and collateral and the dynamics of banking crises: theory and evidence for the Japanese banking crisis
We outline a model of an endogenously evolving banking crisis in a growing economy subject to either idiosyncratic or aggregate productivity shocks. The model incorporates agency problems at two levels: between firms and their banks and between banks and the banks' depositors and deposit insurers. In equilibrium, banks have an incentive to renegotiate loans to insolvent firms, leading to an increasing contingent liability of the government with deposit insurance and regulatory forbearance. The growth rate of output is endogenous, and we explain how the agency problems affect the qualitative ...