In this paper I use a panel data set to investigate the mechanics of sudden stops of capital inflows and current account reversals. I am particularly interested in four questions: (a) What is the relationship between sudden stops and current account reversals? (b) To what extent does financial openness affect the probability of a country being subject to a current account reversal? In other words, do restrictions on capital mobility reduce the probability of such occurrences? (C) Does openness -- both trade openness and financial openness -- play a role in determining the effect of current account reversals on economic performance (i.e. GDP growth)? And, (d) does the exchange rate regime affect the intensity with which reversals affect real activity? The empirical analysis shows that sudden stops and current account reversals have been closely related. The econometric analysis suggests that restricting capital mobility does not reduce the probability of experiencing a reversal. Current account reversals, in turn, have had a negative effect on real growth that goes beyond their direct effect on investment. The regression analysis indicates that the negative effects of current account reversals on growth will depend on the country's degree of trade openness: More open countries will suffer less in terms of lower growth relative to trend than countries with a lower degree of trade openness. On the other hand, the degree of financial openness does not appear to be related to the intensity with which reversals affect real economic performance. The empirical analysis also suggests that countries with more flexible exchange rate regimes are able to accommodate better shocks stemming from a reversal than countries with more rigid exchange rate regimes.

The importance of seigniorage relative to other sources of government revenue differs markedly across countries. This paper tries to explain this regularity by studying a political model of tax reform. The model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and, thus, will rely more heavily on seigniorage. This prediction of the model is tested on cross-sectional data for 79 countries. We find that, after controlling for other variables, political instability is positively associated with seigniorage.

We use high-frequency interest-rate data for a group of Latin American and Asian countries to analyze the behavior of volatility through time. We focus on volatility comovements across countries. Our analysis relies on univariate and bivariate switching volatility models. We compare the results from the switching models with those from rolling-standard-deviation models. We argue that the switching models are superior. Our results indicate that high-volatility episodes are, in general, short-lived, lasting from 2 to 7 weeks. We also find some evidence of interest-rate volatility comovements across countries.

The importance of seignorage relative to other sources of government revenue differs markedly across countries. The main theoretical implication of this paper is that countries with more unstable and polarized political systems rely more heavily on seignorage. This result is obtained within the context of a political model of tax reform. The model implies that the more unstable and polarized the political system, the more inefficient is the equilibrium tax structure (in the sense that tax collection is more costly to administer), and the higher therefore, the reliance on seignorage. This prediction of the model is tested on cross-section data for 79 countries. It is found that, after controlling for other variables, political instability significantly contributes to explain the fraction of government revenue derived from seignorage. This finding is very robust. We also find that seignorage is positively related to political polarization, even though here the evidence is weaker because of difficulties in measuring polarization.