The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries... more The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries? Aaron Tornell ... A Dynamic Model of the Tragedy of the Commons ...
Markets: The Lessons from 1995 THE MEXICAN PESO crisis of December 1994, and its reverberations i... more Markets: The Lessons from 1995 THE MEXICAN PESO crisis of December 1994, and its reverberations in the financial markets of developing countries around the world, has intensified the debate over the nature of balance of payments crises in developing countries. Many simple explanations have been given for the crisis and its aftermath, but none of them does very well at accounting for the main patterns of behavior in emerging markets during late 1994 and 1995. For example, many observers claim that it was Mexico's yawning current account deficit in 1994 that led to the drying up of capital inflows, and thereby to the collapse of the peso. Nonetheless, countries such as Malaysia and Thailand ran comparably large current account deficits in 1990-94 (as a percentage of GDP) without suffering reversals of capital inflows. Other observers claim that investor panic spread contagiously from Mexico throughout emerging markets. This story fits well with the strong adverse market reactions experienced by Argentina and Brazil in early 1995, but not with the experiences of In preparing this paper we benefited from conversations with
We provide a conceptual and empirical framework for evaluating the effects of short-term capital ... more We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided
We provide a conceptual and empirical framework for evaluating the effects of short-term capital ... more We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided
The recent literature offers no shortage of villains to blame for the financial crashes in Mexico... more The recent literature offers no shortage of villains to blame for the financial crashes in Mexico, East Asia, Russia, and Brazil: corruption and cronyism, lack of transparency and imperfect democracy, misguided investment subsidies and loan guarantees, external deficits that are too large (or sometimes too small), fixed exchange rates that are maintained for too long (or abandoned too readily), poor financial regulation, excessive borrowing abroad-the list goes on and on.
This paper starts from a simple model of the domestic banking sector and develops the potentially... more This paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows. Both financial and balance of payments crises may result, reminiscent of the Southern Cone experience.
This paper starts from a simple model of the domestic banking sector and develops the potentially... more This paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows. Both financial and balance of payments crises may result, reminiscent of the Southern Cone experience.
E xiste una múltiple gama de sustancias químicas que se presentan en forma de gas o en forma líqu... more E xiste una múltiple gama de sustancias químicas que se presentan en forma de gas o en forma líquida o sólida que en determinadas circunstancias emiten vapores y que se agrupan como agentes tóxicos volátiles, cuya inhalación puede llevar a situaciones de emergencia.
The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries... more The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries? Aaron Tornell ... A Dynamic Model of the Tragedy of the Commons ...
Markets: The Lessons from 1995 THE MEXICAN PESO crisis of December 1994, and its reverberations i... more Markets: The Lessons from 1995 THE MEXICAN PESO crisis of December 1994, and its reverberations in the financial markets of developing countries around the world, has intensified the debate over the nature of balance of payments crises in developing countries. Many simple explanations have been given for the crisis and its aftermath, but none of them does very well at accounting for the main patterns of behavior in emerging markets during late 1994 and 1995. For example, many observers claim that it was Mexico's yawning current account deficit in 1994 that led to the drying up of capital inflows, and thereby to the collapse of the peso. Nonetheless, countries such as Malaysia and Thailand ran comparably large current account deficits in 1990-94 (as a percentage of GDP) without suffering reversals of capital inflows. Other observers claim that investor panic spread contagiously from Mexico throughout emerging markets. This story fits well with the strong adverse market reactions experienced by Argentina and Brazil in early 1995, but not with the experiences of In preparing this paper we benefited from conversations with
We provide a conceptual and empirical framework for evaluating the effects of short-term capital ... more We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided
We provide a conceptual and empirical framework for evaluating the effects of short-term capital ... more We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided
The recent literature offers no shortage of villains to blame for the financial crashes in Mexico... more The recent literature offers no shortage of villains to blame for the financial crashes in Mexico, East Asia, Russia, and Brazil: corruption and cronyism, lack of transparency and imperfect democracy, misguided investment subsidies and loan guarantees, external deficits that are too large (or sometimes too small), fixed exchange rates that are maintained for too long (or abandoned too readily), poor financial regulation, excessive borrowing abroad-the list goes on and on.
This paper starts from a simple model of the domestic banking sector and develops the potentially... more This paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows. Both financial and balance of payments crises may result, reminiscent of the Southern Cone experience.
This paper starts from a simple model of the domestic banking sector and develops the potentially... more This paper starts from a simple model of the domestic banking sector and develops the potentially destabilizing macroeconomic consequences of its role in intermediating foreign capital inflows. Both financial and balance of payments crises may result, reminiscent of the Southern Cone experience.
E xiste una múltiple gama de sustancias químicas que se presentan en forma de gas o en forma líqu... more E xiste una múltiple gama de sustancias químicas que se presentan en forma de gas o en forma líquida o sólida que en determinadas circunstancias emiten vapores y que se agrupan como agentes tóxicos volátiles, cuya inhalación puede llevar a situaciones de emergencia.
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Papers by Andres Velasco