This paper investigates the implications of external indebtedness and international …nancial integration on the e¤ects of foreign interest rate shocks in a small-open economy. The theoretical component of the analysis develops a business cycle model that can successfully match the impulse responses of the Turkish economy to U.S. interest rate shocks. It is found in the context of this model tha...

Economic theory suggests that a realistic level of borrowing is beneficial for both developing and developed economies in achieving sustainable economic growth. However, as result insufficient domestic resources to fund the “development projects”, required progress, most countries strongly rely on internal (domestic) external (international) capitals such public debt, foreign direct investment ...

This empirical research paper focuses on establishing a relationship between external determinants and economic growth of Pakistan economy. Empirical analyses are carried out with time series econometric techniques using data over the period of 1977-2013. The main finding is that external determinants such as foreign remittances, foreign direct investment, and foreign imports matter from a grow...

I develop a novel link between frictions in international financial markets and fiscal procyclicality. Complementing existing evidence, A decomposition of government expenditure into social spending and public good spending reveals that the cyclical correlation of social spending exhibits the biggest differences across countries. I build a small open economy model with income inequality, endoge...

.................................................................................................................................................. ix Introduction...............................................................................................................................................1 I. The determinants of foreign currency sovereign ratings: theory, data and OLS estimates ...

Argentina set a new historical mark in 2002, having experienced the largest debt default by any country ever. In order to understand how Argentina could go from one of the most developed countries of the Third World, to experiencing the crisis of 2001 and then enter a depression in 2002 with over half the population living in poverty, requires an evaluation of the last quarter century of econom...

The East Asian crisis of 1997-99 was essentially the external debt problems between financial institutions in both host and recipient countries, while the crises in other emerging market economies—such as Russia (1998), Brazil (1999) and Argentina (2001)—were associated with the external debt problems between sovereign borrowers and private investors. Although both crises were triggered by a re...

In his basic model of debt renegotiation, BESTER [1994] argues that collateral is more effective if high risk projects are financed. This result, however, crucially depends on the definition of risk. Using the second-order stochastic dominance criterion introduced by ROTHSCHILD AND STIGLITZ [1970], we show that it is not a project’s high risk, induced by a high probability of default, that make...

Duffie and Lando (2001) were the first to show, under a structural framework, how opacity is priced into credit risk. However, their model is shown to produce results conflicting intuition and empirical observations. In the first part of this study, we propose a biased information model that incorporates skewness into the conditional asset density function. In the second part, we validate our m...