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Business cycle responses and the resilience of the chilean economy
After marked fluctuations in the business cycle over the last fifty years, the Chilean economy now appears to be less volatile and more resilient to external shocks. Because Chile is a small and increasingly open economy, analysts have long suspected that the amplitude of the cyclical fluctuations in ...
Managing the capital account
Globalization has been under attack over the last few years. Activists, famous academics, and commentators of various stripes have mounted a systematic campaign against free trade in goods and, especially, in financial claims. One of the latest manifestations of this antiliberalization mood was the ...
Why are capital flows so much more volatile in emerging than in developed countries?
One of the most studied subjects in open macroeconomics is what determines capital flows. In general, most papers are concerned with estimating the following regression. where the left-hand side is some measurement of capital flows, either as a percentage of gross domestic product (GDP) or as changes, ...
Contingent reserves management: an applied framework
One of the most serious problems that a central bank in an emerging market economy can face is the sudden reversal of capital inflows (or sudden stops). Hoarding international reserves can be used to smooth the impact of such reversals (see, for example, Lee, 2004), but these reserves are seldom ...
Policy responses to external shocks: the experiences of Australia, Brazil, and Chile
Open economies, particularly emerging markets and commodityintensive economies, deal with large external shocks. These are typically of a financial nature in the case of the former and real—in that they affect the terms of trade—in the case of the latter. Alternative policy reactions and policy setups ...
External conditions and growth performance
A central dimension of globalization is the world trend toward larger trade and financial openness, observed in most industrial and developing economies. Openness increases the integration of world goods and capital markets, contributing to potential gains in growth and welfare. However, increased ...
External vulnerability and preventive policies: an overview
Emerging market economies endure significantly more macroeconomic volatility than industrial countries. Output volatility in emerging market economies is more than twice as large as that in industrial economies, and consumption volatility is three times as large. Recent studies corroborate the view ...
Sovereign debt, volatility, and insurance
International capital inflows should, in theory, enable emerging market economies to reduce the volatility of private and public consumption in the presence of income volatility, in addition to allowing foreign savings to finance domestic capital accumulation. Access to international financial markets ...
Is the foreign exchange derivatives market effective and efficient in reducing currency risk?
Floating foreign exchange rates have gained increased support as a preferred system for reducing the vulnerability of emerging markets to external shocks. The volatility associated with floating exchange rates, however, exposes economic agents to the risk of changes in the valuation of the financial ...
Large hoardings of international reserves: are they worth it?
Several Asian economies have accumulated large stocks of international reserves over the last few years. This motivates the question we address in this paper from an empirical point of view. Are these large increases in reserves an efficient crisis-prevention strategy? Or are they second-best to other ...