Ongoing research
Recovering from bond market distress: the interaction of domestic
policies and IMF programs, with Ghislaine Weder.
This paper focuses on bond market distress and crisis
resolution. Bond market distress episodes are identified on the basis of
secondary market sovereign spreads and duration models are used to examine the
relative importance of external, macroeconomic and institutional determinants.
Our results show that international real and financial conditions, domestic
policies and IMF programs affect the duration of distress. Importantly, the
effect of domestic policy is conditional on both international financial
conditions and IMF programs. It is more effective when the global environment
is more favourable, and less effective when an IMF program is in place.
Finally, we uncover evidence supporting the theoretical work of Morris and Shin
(2006) in that official financing is catalytic when economic fundamentals are
bad but not hopelessly so.
Exchange rates regimes as real options: theory and applications.
This set of papers proposes to model the decisions
about the exchange rate regime as a real option. Standard models of optimal
devaluations and currency crises assume that the authorities will devalue or
abandon the current exchange rate regime whenever the benefits of doing so
outweigh a fixed cost. Yet, this decision faces considerable uncertainty about
future fundamentals, giving rise to a value of waiting.
Indicators of regional financial integration,
with Agustín Bénétrix.
This book chapter describes indicators of regional
financial integration and applies them to various regions of the world. We
focus on a set of indicators that are 1) easy to implement and to interpret, 2)
based on publicly available data, and 3) available for many countries and
regions over relatively long periods of time.