This paper argues that the recent Southeast Asian currency crises was caused by large prospective deficits associated with implicit bailout guarantees to failing banking systems. We articulate this view using a simple dynamic general equilibrium model whose key feature is that a speculative...

How much of carry trade excess returns can be explained by the presence of disaster risk? To answer this question, we propose a simple structural model that includes both Gaussian and disaster risk premia and can be estimated even in samples that do not contain disasters. The model points to a...

This paper analyzes the dynamic interaction between norms - internalized restraints on opportunistic behaviour - and institutions - restraints on such behaviour deriving from external enforcement. When individuals following a norm suffer pecuniary losses to doing so, the norm is eroded....

The 1980s have seen the beginnings of a change of heart among developing country policymakers, as the import-substitution consensus of the previous decade has all but evaporated. It is paradoxical that the 1980s should have become the decade of trade liberalization in LDCs, since this has also...

Only a few years ago the conventional wisdom predicted that globalization would render the demise of the region as a meaningful unit of economic analysis. Yet the obsession of policy-makers around the globe to 'create the next Silicon Valley' reveals the increased importance of geographic...

A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage. Those emerging economies that avoided leverage booms during the 2000s also were most likely to avoid the worst effects of the twenty-first century’s first global...

The sovereign debt default and the linkages from banking and currency crisis have been rarely explored in the crisis literature. This study attempts to dive into this unexplored area by applying panel data binary choice model on a sample with 20 emerging countries having monthly observations for...

We examine the evolution of the Icelandic banking sector in its macroeconomic environment. The story culminates in the crisis of October 2008, when all three major banks in Iceland collapsed in three successive days. The country is still struggling to cope with the consequences. The paper...

We pursue the idea that a region presents a common ‘prospectus’ to investors and lenders. Specifically, we explore whether investors respond to regional developments, rather than to country-specific fundamentals. Such behaviour may be appropriate where regions are identified by common...