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Updated 526 days ago
Among real exchange rates deflated by various prices (CPI, GDP deflator, unit labor cost), only unit-labor-cost-based one shows significant negative correlation with external balance, and it can be rationalized by price and wage rigidity alongwith intermediate goods trade...
Overborrowing in short-term debt is especially severe because the repayment of short-term liabilities is larger than that of long-term liabilities in future constrained states, resulting in greater cost undervaluation of short-term financial obligations. Therefore, tightening of capital controls should tilt toward short maturities during financial crises...
Negative r-g have occurred more often than not, in both advanced and emerging economies. However, r-g are no higher prior to sovereign defaults than in normal times.