We investigate a banking system subject to repeated macroeconomic productivity shocks. By lowering the interest rates, the central bank can increase the intermediation margin, which fosters the recapitalization of banks. We show that without lowering interest rates, the banking system faces the risk of collapsing. When interest policy is aimed only at avoiding a banking collapse, the economy co...

B etween 1980 and 1998, Latin America and the Caribbean experienced more than forty episodes in which gross domestic product (GDP) fell by 4 percent or more. Poverty increased sharply during these episodes. Despite this, most countries in the region do not have appropriate instruments to shield poor people (and the near-poor) from the brunt of macroeconomic shocks. Improvising to protect the po...

The Response of Consumption in Russian Households to Economic Shocks This paper examines the extent to which consumption in Russian households responds to exogenous income shocks. During the time period studied in this paper (1994 – 1998), Russia experienced two major economic crises. Both featured extreme movements in the real ruble-dollar exchange rate. The price of oil, which is typically th...

One of the striking characteristics of the recent currency crises in East Asia is the sharp reductions in output that followed depreciations. This paper draws on an earlier literature on contractionary depreciations to motivate an empirical model of the relationship between exchange rate and output fluctuations in a panel of six East Asian economies. There is evidence of a negative relationship...

Failure to timely identify the occurrence of various shocks in the foreign exchange market due to the close relationship with the monetary, macroeconomic, and financial uncertainty can lead to crises and imbalances. In this paper, the effect of exchange rate and investor confidence on monetary and economic uncertainty in Iran is investigated, specifying a Multivariate GARCH model and the Grange...

The recent global financial crisis once again revealed the harmful effects of interest-based contracts in the conventional financial system. Islamic finance, as an alternative financial system, discourages interest rate and debt financing. This paper investigates the effects of two financial systems, namely the conventional and Islamic systems, on macroeconomic variables. To achieve this goal, ...

Small-scale fishers in Bangladesh face substantial risks due to their occupation and their geographical setting. Without any effective buffer against crises, recurring shocks and on-going risk exposure are major factors pushing fishers into poverty. Not all fishers experience these events in the same way, however, with some of them showing higher capacity to negotiate risks. In this study, we a...