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Sovereign Default Risk and Bank Fragility in Financially Integrated Economies
The paper analyzes contagious sovereign debt crises in financially integrated economies. Under financial integration banks optimally diversify their holdings of sovereign debt in an effort toExpand
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Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach
This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents aExpand
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International Reserves in Emerging Market Countries: Too Much of a Good Thing?
This paper considers whether the recent buildup in emerging market countries’ international reserves can be justified as precautionary insurance against volatility in capital flows. It presents aExpand
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Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy
The link between monetary policy and asset price movements has been of perennial interest to policy makers. In this paper we consider the potential case for pre-emptive monetary restrictions whenExpand
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Noise Trading and Exchange Rate Regimes
Both the literature and new empirical evidence show that exchange rate regimes differ primarily by the noisiness of the exchange rate, not by measurable macroeconomic fundamentals. This motivates aExpand
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Are currency crises self-fulfilling?: A test
Abstract This paper studies the respective roles of the fundamentals and self-fulfilling speculation in currency crises. We first present a model of a fixed exchange rate system in whichExpand
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Managing Credit Booms and Busts: A Pigouvian Taxation Approach
We study a dynamic model in which the interaction between debt accumulation and asset prices magnifies credit booms and busts. We find that borrowers do not internalize these feedback effects andExpand
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The Optimal Level of International Reserves for Emerging Market Countries: A New Formula and Some Applications
We present a model of the optimal level of international reserves for a small open economy seeking insurance against sudden stops in capital flows. We derive a formula for the optimal level ofExpand
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Conspicuous consumption, snobbism and conformism
Abstract We develop a model in which consumers purchase a conspicuous good in order to signal high income and thereby achieve greater social status. In equilibrium, the signalling value ofExpand
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Monetary Policy and Asset Prices: Does 'Benign Neglect' Make Sense?
The link between monetary policy and asset price movements has been of perennial interest to policymakers. In this paper, we consider the potential case for preemptive monetary restrictions whenExpand
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