Market participants routinely take advantage of the failure of uncovered interest rate parity to speculate in currency markets. Perhaps the most widely used currency speculation strategy is the carry trade. In this article ...

This paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle. To this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization ...

This paper addresses two questions: (i) how do governments actually pay for the fiscal costs associated with currency crises; and (ii) what are the implications of different financing methods for post-crisis rates of ...

Currency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there ...

This paper argues that the recen Southeast Asian currency crisis was caused by large prospective deficits associated with implicit bailout guarantees to failing banking systems. We articulate this view using a simple dynamic ...

This article assesses the small-sample properties of generalized-method-of-moments-based Wald statistics by using (a) a vector white-noise process and (b) an equilibrium business-cycle model as the data-generating mechanisms. ...