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Working Paper
On the sustainability of international coordination
Journal Article
The Mexican economic crisis: alternative views
The authors of this article suggest that many of the explanations for the 1994 crisis are based on questionable assumptions and dubious analysis. They contend that, when trying to explain the crisis, most authors have concentrated on the wrong economic "fundamentals." They challenge the conventional view that the crisis was caused by a combination of flawed fiscal, monetary, and exchange rate policies. Their explanation for the crisis belongs in an alternative camp that emphasizes the vulnerability of the Mexican financial system to swings in expectations and investor confidence. ; In their ...
Working Paper
Are there optimal multiple reserve requirements?
A number of developing countries have adopted deficit-finance regimes involving multiple reserve requirements. One question the previous literature on this phenomenon has not addressed is whether multiple-reserves regimes can improve on regimes involving single-currency-reserve requirements if the policy settings of the latter regimes are assumed to be chosen optimally. We find that a "conventional" multiple-reserves regime--a regime with positive nominal rates on reservable bonds--cannot Pareto-improve an optimal single-currency-regime but can, in some cases, increase social welfare over ...
Working Paper
Barriers to international capital flows: who should erect them and how big should they be?
Until recently, the trend in world capital markets has been toward increasing globalization. Recent events in Latin America and Asia have caused many in policy-making circles to question whether this trend should be wholly, or at least partially, reversed. It is commonly argued that?at a minimum?countries should be given the discretion to erect such barriers, at least in certain circumstances. Recent events, then, have forced a rethinking of the desirability of unrestricted world capital flows. The general presumption appears to be that the "victims" of highly volatile capital flows should ...
Working Paper
A public finance analysis of multiple reserve requirements
This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to present a model in which it is possible for a multiple reserves regime to improve social welfare relative to simpler regimes involving reserve requirements and/or deposit taxes. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive ...
Working Paper
Debt maturity, risk, and asymmetric information
We test the implications of Flannery?s (1986) and Diamond?s (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data from more than 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond?s model and with much of the empirical literature. Our findings also suggest a strong ...
Working Paper
Government financing in an endogenous growth model with financial market restrictions
In this paper we develop an endogenous growth model with market regulations on explicitly modeled financial intermediaries to examine the effects of alternative government financing schemes on growth, inflation, and welfare. ; We find that in the presence of binding legal reserve requirements, a marginal increase in government spending need not result in a reduction in the rate of economic growth if it is financed with an increase in the seigniorage tax rate. Raising the seigniorage tax base by means of an increase in the reserve requirement retards growth and has an ambiguous effect on ...