Research and Policy Papers

For a complete list of publications, click the CV section.


Policy Papers

Policy Notes


LIQUIDITY DEFLATION: Supply-Side Liquidity Trap, Deflation Bias and Flat Phillips Curve, September 24, 2018

LIQUIDITY DEFLATION AND LIQUIDITY TRAP UNDER FLEXIBLE PRICES: Some Microfoundations and Implications, September 24, 2018

FIGHTING CHRONIC INFLATION WITH INTEREST RATES: Cutting a Hydra's Heads with a Swiss Army Knife? October 22, 2017

From Chronic Inflation to Chronic Deflation: Focusing on Expectations and Liquidity Disarray Since WWII, August 2016

Labor Market, Financial Crises and Inflation: Jobless and Wageless Recoveries, June 2014

Sudden Stop and Sudden Flood of Foreign Direct Investment: Inverse Bank Run, Output, and Welfare Distribution, January 2014

Jobless Recoveries During Financial Crises: Is Inflation the Way Out?, November 2013

The Liquidity Approach and the Price Theory of Money:
Disentangling the Mysteries of Financial Crises
, November 2013

Puzzling Over the Anatomy of Crises: Liquidity and the Veil of Finance, June 2013

The Labor Market Consequences of Financial Crises With or Without Inflation:
Jobless and Wageless Recoveries
, October 25, 2012

On Capital Inflows, Liquidity and Bubbles, October 15, 2012

The Price Theory of Money, Prospero’s Liquidity Trap, and Sudden Stop, July 2012

Optimal Holdings Of International Reserves: Self-Insurance Against Sudden Stop, July 2012

"Financial Crises and Liquidity Shocks: A Bank-Run Perspective", November 25, 2011

Systemic Sudden Stops: The Relevance Of Balance-Sheet Effects And Financial Integration, NBER Working Paper 14026, May 2008.

Interest Rate Rules, Inflation Stabilization, and Imperfect Credibility: The Small Open-Economy Case, NBER Working Paper 13177, June 2007.

Monetary Policy Challenges in Emerging Markets: Sudden Stop, Liability Dollarization, and Lender of Last Resort. NBER Working Paper 12788.

Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises(with Alejandro Izquierdo and Ernesto Talvi) NBER Working Paper 12101.

Crises in Emerging Market Economies: A Global Perspective. NBER Working Paper 11305.

Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile(with E. Talvi) NBER Working Paper W11153.

On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects(with A. Izquierdo and F. Mejia) NBER Working Paper 10520.

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Policy Papers

Towards an Emerging Market Fund, September 2014

US Unemployment: Neither Natural Nor Unnatural, July 2012

Creation and Destruction of Liquidity (in Spanish), July 2012.

Enseñanzas de la Globalización Financiera. Lo Nuevo y lo Falaz. Cuadernos de Información Económica 200, Fundación de las Cajas de Ahorro, Madrid, Spain. October 2007.

The resolution of global imbalances: Soft landing in the North, sudden stop in emerging markets?

ABSTRACT: The paper shows that the increase in the US current account deficit since 1997 was financed by Emerging Market economies, EMs. Since 2001 a large share of the funding was carried out by the official sector, taking mostly the form of accumulation of international reserves. The paper argues that (1) if official funding is stopped or reversed, the private sector in EMs is likely to provide offsetting funds, preventing the US to go through a Sudden Stop episode; and (2) in the unlikely event that global saving collapses, the brunt of the adjustment is likely to be borne by EMs, e.g., through Sudden Stops, and flight to quality likely to ensure the US a smooth transition, i.e., a soft landing.

Capital Flow Reversals, the Exchange Rate Debate, and Dollarization(with C. Reinhart), September 1999

When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options(with C. Reinhart), June 29, 1999

ABSTRACT:In this paper we present evidence that capital account reversals have become more severe for emerging markets. Because policy options are limited in the midst of a capital market crisis and because so many countries have already had crises recently, we focus on some of the policies that could reduce the incidence of crises in the first place, or at least make the sudden stop problem less severe. In this regard, we consider the relative merits of capital controls and dollarization. We conclude that, while the evidence suggests that capital controls appear to influence the composition of flows skewing flows away from short maturities, such policies are not likely to be a long-run solution to the recurring problem of sudden capital flow reversals. Yet, because fear of floating, many emerging markets are likely to turn to increased reliance on controls. Dollarization would appear to have the edge as a more market-oriented option to ameliorate, if not eliminate, the sudden stop problem.

Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops, July 20, 1998.

Empirical Puzzles of Chilean Stabilization Policy, March 5, 1998.

ABSTRACT: This paper reviews Chilean stabilization policy during the 1990s and argues that, while the merits of Chilean policy should be praised, there are four puzzles in conventional interpretations of the Chilean experience worth studying. First, the policy of targeting indexed interest rates does not coincide with a policy of targeting real interest rates. Second, there is no systematic link between the decline in inflation and the upward adjustments in indexed interest rates. Third, changes in the exchange rate and in the performance of the external sector help explain the decline in inflation. Fourth, the strong cyclical growth of the real economy was influenced in part by the large and persistent increase in the world price of Copper. We provide statistical evidence favoring these arguments using recursively-identified vector-autoregression models, and sketch a model of staggered pricing under indexation that sheds some light on the Chilean case.

Notas sobre la Política Macroeconómica en El Salvador, December 28, 1997.

Monetary and Exchange Rate Policy For Mexico, June 8, 1997.

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Policy Notes, a website promoting research-based policy analysis and commentary from leading economists, publishes a new article, "U.S. Recovery: A New 'Phoenix Miracle'?", by Guillermo Calvo and Rudy Loo-Kung. Prof. Calvo's previous contributions to are available on the VoxEU website, as well as linked from the Policy Notes section.

"Controls on Cyclical Capital Inflows: Some Sceptical Notes", April 22‐23, 2010.

"Easy to Explain, Hard to Prognosticate: Discussion Notes on Systemic Sudden Stops", July 10, 2009.

Globalization and Systemic Risk, address by Guillermo Calvo, "The Current Financial Crisis: Will Latin America Be Caught in the Web, Again?" The book is also available from

Controls on Cyclical Capital Inflows: Some Sceptical Notes

A note prepared for the XXXI Latin American Network of Central Banks and Finance Ministries, IADB, April 22‐23, 2010.

U.S. Recovery: A New "Phoenix Miracle"? (with Rudy Loo-Kung), a note prepared for, April 12, 2010

A Theory of How International Reserves and Easy Money Caused the Crisis, a note prepared for, October 27, 2009

Triple Time-Inconsistent Policies, a note prepared for, August 31, 2009

Easy to Explain, Hard to Prognosticate: Discussion Notes on Systemic Sudden Stops

A note prepared for a discussion on the lessons of financial crises organized by the Centro de Estudios Espinosa Yglesias, A.C., Mexico City, Mexico, July 10, 2009.

How Bad are Bubbles for Welfare? (with Rudy Loo-Kung), a note prepared for, June 29, 2009

The G20 Communiqué: Work in Progress but Good News for Emerging Markets, a note prepared for, April 6, 2009

Establishing a Global Lender of Last Resort, a note prepared for, March 23, 2009

Needed: Rapid and Large Liquidity Funding for Emerging Markets (with Rudy Loo-Kung), a note prepared for, December 10, 2008

Exploding Commodity Prices Signal Future Inflation, a note prepared for, June 20, 2008

The Case for Hard Pegs, June 21, 2000

Testimony On Dollarization, June 22, 2000

Public Debt And The Macroeconomy, May 25, 1999

Contagion In Emerging Markets: when Wall Street is a carrier(Technical Supplement to "Understanding the Russian Virus"), May 2, 1999

Abstract: The paper examines the case in which the capital market is populated by informed and uninformed investors. The uninformed try to extract information from informed investors’ trades. This opens up the possibility that if informed investors are forced to sell emerging market securities to meet margin calls, for example, this action may be misread by the uninformed investors as signaling low returns in emerging markets. The paper presents a simple model in which this type of Wall Street confusion may result in a collapse in emerging markets’ output.

Testimony On Full Dollarization, April 22, 1999

On Dollarization, April 20, 1999

Argentina's Dollarization Project: A Primer, February 18, 1999

Understanding The Russian Virus (with special reference to Latin America), October 13, 1998

Capital Flows: Emerging Issues, October 1997

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