In finance, which has been my most recent area of work, I have dealt with three related issues. First, in many countries, as governments have attempted to shift the burden of financing infrastructure to the private sector, they have also maintained a role as guarantors of the obligations of government agencies. However, finance ministries have typically been concerned about the "contingent liabilities," generated when guarantees are issued. The papers in this area reflect both practical suggestions for managing contingent liabilities and the review and development of tools for valuing and monitoring the future claims generated.
Second, as an economist in the World Bank's Project Finance and Guarantees Department, I have participated in the financial structuring of specific projects. Project Finance is largely about the allocation of risks to various parties. Some of my observations are recorded in papers dealing with risk allocation in the water and sanitation sector.
Finally, in recent research I have sought to examine the determinants of spreads on debt issued by emerging market sovereigns, public agencies, and private corporations. These papers attempt to identify the extent to which the spreads are determined by domestic "fundamentals," external liquidity conditions (proxied by the U.S. interest rate), and by fads (or the herd instinct). The importance of the herd instinct in bond markets is reminiscent of the herd behavior identified in papers on foreign investment (see Foreign Investment and Trade: Agglomeration and Persistence Effects).
"Methods of Loan Guarantee Valuation and Accounting," and in Ashoka Mody, ed., Infrastructure Delivery: Private Initiative and the Public Good, The Economic Development Institute, The World Bank, Washington D.C.Shorter version of the paper appeared as "Valuing and accounting for loan guarantees," World Bank Research Observer 11 (1): 119-142, February 1996, with Dilip Patro.
"A house of cards: government guarantees," Project and Trade Finance 154: 40-42, February 1996, with Mac Johnston and Robert Shanks.
"Contingent liabilities for infrastructure projects: implementing a risk management framework for governments," Public Policy for the Private Sector: Viewpoint 148, August 1998, The World Bank Group, Finance, Private Sector, and Infrastructure Network, with Christopher M Lewis. Draws on "The management of contingent liabilities: a risk management framework for national governments."
"Risk management systems for contingent infrastructure liabilities: applications to improve contract design and monitoring," Public Policy for the Private Sector: Viewpoint 149, August 1998, The World Bank Group, Finance, Private Sector, and Infrastructure Network, with Christopher M Lewis. Draws on "The management of contingent liabilities: a risk management framework for national governments."
"The management of contingent liabilities: a risk management framework for national governments," in Timothy Irwin, Michael Klein, Guillermo Perry, and Mateen Thobani, ed., Dealing with Public Risk in Private Infrastructure, World Bank Latin American and Caribbean Studies, The World Bank, Washington D.C, 1997, with Christopher Lewis.
"Financing water and sanitation projects: the unique risks," Public Policy for the Private Sector: Viewpoint 151, September 1998, The World Bank Group, Finance, Private Sector, and Infrastructure Network, with David Haarmeyer. Draws on "Tapping the private sector: approaches to managing risks in water and sanitation."
"Pooling water projects to move beyond project finance," Public Policy for the Private Sector: Viewpoint 152, September 1998, The World Bank Group, Finance, Private Sector, and Infrastructure Network, with David Haarmeyer. Draws on "Tapping the private sector: approaches to managing risks in water and sanitation."
"Tapping the private sector: approaches to managing risks in water and sanitation," RMC Discussion Paper Series, 122, February 1998, with David Haarmeyer. Also appeared in The Journal of Project Finance 4(2): 1-28, September 1998.
"What explains spread on emerging market debt?" in Sebastian Edwards, ed., Capital Flows and The Emerging Economies: Theory, Evidence, and Controversies, Chicago: The University of Chicago Press, 2000, with Barry Eichengreen. Earlier version appeared as National Bureau of Economic Research Working Paper 6408, February 1998.
"Interest rates in the North and capital flows to the South," International Finance 1(1): 35-57, October 1998, with Barry Eichengreen.
"Lending booms, reserves, and the sustainability of short-term debt: inferences from the pricing of syndicated loans," Journal of Development Economics 63 (1): 5-44, October 2000, with Barry Eichengreen. Available also as National Bureau of Economic Research Working Paper 7113, May 1999.
"Asian Restructuring: From Cyclical Recovery to Sustainable Growth," Chapter 3 of Global Economic Prospects 2000, December 1999, The World Bank, Washington D.C. The full report is at: http://www.worldbank.org/prospects/gep2000/full.htm.
"Do collective action clauses raise borrowing costs?" The Economic Journal, 114 (April), 247–264, 2004, with Barry Eichengreen.
"Flight to quality: investor risk tolerance and the spread of emerging market crises," in Stijn Claessens and Kristin Forbes, eds., International Financial Contagion, forthcoming Kluwer Academic Publishers, May 2001 (book details and chapters available from http://web.mit.edu/kjforbes/www/book1.html), with Barry Eichengreen and Galina Hale.
"Safeguarding against crisis: the near-term agenda," Chapter 5 of Global Development Finance 2000, April 2000, The World Bank, Washington D.C. The full report is at: http://www.worldbank.org/prospects/gdf2000/index.htm.
"Will self-protection policies safeguard emerging markets from crises?" in Charles Adams, Robert E. Litan, and Michael Pomerleano, eds., Managing Financial and Corporate Distress: Lessons from Asia, Washington D.C.: Brookings Institution Press, April 2000, with Kenneth Kletzer.
"Priorities for the management of contingent liabilities," in Hana Brixi, Allen Schick, and Sweder van Wijnbergen, eds., Government at Risk: Contingent Liabilities and Fiscal Risk, forthcoming Oxford University Press, current version May 2000, with Hana Brixi.
"Contingent liabilities in infrastructure: lessons from the East Asian crisis," in Hana Brixi, Allen Schick, and Sweder van Wijnbergen, eds., Government at Risk: Contingent Liabilities and Fiscal Risk, forthcoming Oxford University Press, current version, May 2000.
"Bail-ins, Bailouts, and Borrowing Costs," IMF Staff Papers 47: 155-187, with Barry Eichengreen.
"Private Capital Flows and Growth," Finance and Development 38(2): 2-5, with Antu Murshid and Deepak Mishra.
"Global Development Finance 2001: Building Coalitions for Effective Development Finance," The World Bank, Washington D.C.
"Modelling Fundamentals for Forecasting Capital Flows to Emerging Markets," International Journal of Finance and Economics 6(3): 201-216, 2001, with Mark Taylor and J.Y. Kim.
Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws, World Bank Institute, WBI Development Studies, World Bank, Washington, D.C., edited with Stijn Claessens and Simeon Djankov, 2001.
"International Capital Crunches: The Time-Varying Role of Informational Asymmetries," Applied Economics, 45(20): 2961-2973, an earlier version appeared as IMF Working Paper, WP/02/43, with Mark Taylor.
"Growing Up With Capital Flows," IMF Working Paper WP/02/75, 2002, Journal of International Economics,65 (1): 249-266, January 2005, with Antu Murshid.
"Regional Vulnerability: The Case of East Asia," Journal of International Money and Finance 26(8): 1292-1310, 2007, with Mark Taylor.
"The High Yield Spread as a Predictor of Real Economic Activity: Evidence of a Financial Accelerator for the United States," IMF Staff Papers 50(3): 373-402, 2003, with Mark Taylor.
"Financial Reform: What Shakes It? What Shapes It?," American Economic Review, 95 (1): 66-88, March 2005; earlier version as International Monetary Fund Working Paper WP/03/100, May 1, 2003, with Abdul Abiad.
Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices? The Economic Journal, 116 (July), 843–867, 2006, with Diego Saravia.
"A Cross-Country Financial Accelerator: Evidence from North America and Europe," Journal of International Money and Finance 26(1): 149-165, 2007, with Lucio Sarno and Mark Taylor.
"Financial integration, capital mobility, and income convergence," Economic Policy 24: 241-305, April 2009, an earlier version appeared as "International Finance and Income Convergence: Europe is Different," IMF Working Paper, WP/07/64, March 2007, Washington D.C., with Abdul Abiad and Daniel Leigh.
"Exits from Heavily Managed Exchange Rate Regimes," IMF Working Paper," WP/05/39, February 2005, Washington D.C. with Enrica Detragiache, and Eisuke Okada.
"International Pricing of Emerging Market Corporate Debt: Does the Corporate Matter?," IMF Working Paper, WP/10/26, January 2010, with Sonja Keller.
"After the Crisis: Lower Consumption Growth but Narrower Global Imbalances?," IMF Working Paper, WP/10/11, January 2010, with Franziska Ohnsorge.
"From Bear Stearns to Anglo Irish: How Eurozone Sovereign Spreads Related to Financial Sector Vulnerability," IMF Working Paper, WP/09/108, May 2009.
"Speed of IMF Response," an earlier version appeared as "From Crisis to IMF-Supported Program: Does democracy impede the speed required by financial markets?" IMF Working Paper, WP/08/276, December 2008, with Diego Saravia.
"Can Domestic Policies Influence Inflation?," IMF Working Paper, WP/07/257, November 2007, with Franziska Ohnsorge.
"International Financial Crises and the Multilateral Response: What the Historical Record Shows," forthcoming Journal of International Economics, an earlier version appeared as NBER Working Paper No. 17361, August 2011, with Bergljot Barkbu and Barry Eichengreen.
"Precautionary Savings during the Great Recession," IMF Economic Review 60 (1): 114-138, 2012, with Franziska Ohnsorge and Damiano Sandri.
"The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined at the Hip," Economic Policy, 27: 199-230, April 2012, with Damiano Sandri.
"Paths to Eurobonds," IMF Working Paper 12/172, July 2012, with Stijn Claessens and Shahin Vallée.
"How the Subprime Crisis Went Global: Evidence from Bank Credit Default Swap Spreads," Journal of International Money and Finance 31(5): 1299–1318, September 2012, an earlier version appeared as NBER Working Paper 14904, August 2009, with Barry Eichengreen, Milan Nedeljkovic, and Lucio Sarno.