This paper explains why public domestic debt composition in emerging economies can be risky, namely in foreign currency, with a short maturity or indexed. It analyses empirically the determinants of these risk sources separately, developing a new large dataset compiled from national sources for 33 emerging economies over 1994-2006. The paper finds that economic size, the breadth of the domestic...

I estimate a multivariate probit model to identify key variables that are predictive of banking crises. To add to the literature on this subject, I focus on the role played by unofficial dollarization of domestic banking systems. Unofficial dollarization is a source of vulnerability for emerging markets as large depreciations render both domestic firms and banks unable to pay dollar-denominated...

What determines the sustainability of sovereign debt? In this paper, we develop a model where myopic governments seek electoral popularity but can nevertheless commit credibly to service external debt. They do not default when they are poor even though default costs are low because they would lose access to debt markets and be forced to reduce spending; they do not default when they become rich...

This paper characterizes optimal IMF policy in an environment with moral hazard followed by adverse selection. In our framework, government actions to improve domestic productivity are not always e¤ective, and the government learns of the success of its actions before foreign investors. Without the IMF, it is not possible for foreign investors to discern the quality of the domestic production s...

An extensive literature has found that individuals favor investments that they are more familiar with and are geographically proximate. Familiarity bias implies that foreign investors may perceive lower expected payoff and/or higher risk for domestic firm’s asset payoffs. This paper explores how a firm issues different securities across borders in segmented international financial markets under...

This paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership. We employ a model of endogenous foreign subsidiary ownership to derive a set of empirically testable hypotheses about the differential taxation of foreignand domestically-owned subsidiaries. We assess these hypotheses in a dataset of 33,577 European foreignand domestically-owne...

The authors model trading by foreign and domestic investors in developed-country equity markets. The key assumptions are that (i) both the foreign and domestic investor populations contain investors of different sophistication, and (ii) investor sophistication matters for performance in both public equity and private off-market investments. A quantitative model with these assumptions delivers a...

The objective of this paper is to review the transmission mechanisms uniting equity market development and economic growth in developing countries. We find that the theoretical impact of equity markets is ambiguous. At the domestic level, the allocation function of equity markets appears conditioned by the extent of informational efficiency. Turning to international linkages, theoretical models...

The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (BackusSmith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and limited enforcement for international financi...

This paper examines the main structural and performance features of European banking. It shows that while banking markets have become increasingly concentrated and bank numbers have fallen, competition appears to have intensified. Given the large number of banks and branches in many countries there still remain indicators of excess capacity in the system and that the consolidation trend, especi...