International finance

Pierre-Olivier Gourinchas, Maurice Obstfeld, 21 July 2015

What explains the different effects of the crisis around the world? This column compares the 2007–09 crisis to earlier episodes of banking, currency, and sovereign debt distress and identifies domestic-credit booms and real currency appreciation as the most significant predictors of future crises, in both advanced and emerging economies. It argues these results could help policymakers determine the need for corrective action before crises hit.

Joshua Aizenman, Menzie D. Chinn, Hiro Ito, 09 July 2015

Monetary policies of financial centre countries could have large spillover effects on smaller economies. This column argues that the strength of the links with the centre economies has been the major factor affecting financial conditions in emerging and developing countries. Open macro policies such as the exchange rate regime and financial openness are also important. An economy that pursues greater exchange rate stability and financial openness has a stronger link with the centre economies.  

Tamon Asonuma, Said Bakhache, Heiko Hesse, 04 July 2015

Home bias in banks’ holdings of domestic government debt could pose problems for financial stability and crisis management. This column discusses some of the determinants of this bias. Factors that increase macroeconomic instability are associated with higher home bias, while better investment opportunities in the private sector and better institutional quality reduce home bias.

Jon Danielsson, Ásdís Kristjánsdóttir, 11 June 2015

Iceland has just announced it is getting rid of its capital controls. This column argues that the government’s plan is a credible, efficient and fair plan to lift the costly and misguided controls.

Serkan Arslanalp, Reinout De Bock, Matthew Jones, 04 June 2015

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans.

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