Stock returns over the two years surrounding 24 currency devaluations are examined. Using bootstrapped distributions, returns preceding the devaluation are shown to be significantly below normal, in both dollar and local currency terms. Most of the downturn, however, occurs well before the month of the devaluation. Returns following a devaluation are more normal. While industry and company spec...

This paper analyzes the change in the capital structure behavior in a sample of Spanish venture capital (VC) backed firms after the first capital infusion. We find that VC investors contribute to unlisted growing firms in the attraction of other long term sources of funds to continue their growth process. Our results show significant changes in determinants such as tangibility, size and profita...

A central question in emerging-market macroeconomics is what factors lead countries to accumulate excessive levels of external debt. It is often argued by economic observers and policymakers that emerging markets tend to overborrow when the lending decisions of foreign financial institutions are guided by rough indicators of the emerging country’s macroeconomic performance, and not by careful a...

This is a summary of the report of an expert group meeting on resource mobilization for poverty eradication in the least developed countries held at United Nations Headquarters in New York on 19 and 20 January 2004. The first part of the report provides an overview of the current challenges faced by the LDCs in reducing the high rates of widespread poverty. The second part discusses innovative ...

Political economy theory expects politicians to use budget deficits to engineer an election-timed boom, known as the political business cycle. We challenge and contextualize this view by incorporating the financial constraints faced by governments into an electoral framework. We argue theoretically that the extent of ownership dispersion among creditors has important effects for governments’ po...

We study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). We expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to...

The objective of this paper is to estimate the relative contribution of a wide array of determinants to outbreak of financial crises in the EU candidate countries (Croatia, Macedonia and Turkey) and to identify the best-performing early warning indicators of financial crises. We have estimated a binomial logit model of the three EU candidate countries for the period 2005Q1 to 2009Q4 using actua...

The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of credit agencies and debt issuers may have resulted in conflict of interest when pricing these securities which has lead to incorrect risk assumptions and val...

We analyze optimal fiscal and monetary policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. Optimal policy prescribes the exclusive use of long term debt. Such debt mitigates the distortions associated with hedging fiscal shocks by allowing the government to allocate them efficiently across states and periods.

Why do some developing country governments accumulate large foreign debts while others do not? I hypothesize that variation in foreign borrowing is a function of variation in the breadth of public participation in the political process. Specifically, governments borrow less when political institutions enable broad public participation in the political process and encourage the revelation of inf...