WorldCat Identities

Mendoza, Enrique G. 1963-

Works: 107 works in 530 publications in 1 language and 3,775 library holdings
Roles: Editor
Classifications: HB1, 330.072
Publication Timeline
Publications about  Enrique G Mendoza Publications about Enrique G Mendoza
Publications by  Enrique G Mendoza Publications by Enrique G Mendoza
Most widely held works by Enrique G Mendoza
Precautionary demand for foreign assets in sudden stop economies an assessment of the new merchantilism by Ceyhun Bora Durdu ( )
17 editions published in 2007 in English and held by 260 WorldCat member libraries worldwide
Financial globalization was off to a rocky start in emerging economies hit by Sudden Stops since the mid 1990s. Foreign reserves grew very rapidly during this period, and hence it is often argued that we live in the era of a New Merchantilism in which large stocks of reserves are a war-chest for defense against Sudden Stops. We conduct a quantitative assessment of this argument using a stochastic intertemporal equilibrium framework with incomplete asset markets in which precautionary saving affects foreign assets via three mechanisms: business cycle volatility, financial globalization, and Sudden Stop risk. In this framework, Sudden Stops are an equilibrium outcome produced by an endogenous credit constraint that triggers Irving Fisher's debt-deflation mechanism. Our results show that financial globalization and Sudden Stop risk are plausible explanations of the observed surge in reserves but business cycle volatility is not. In fact, business cycle volatility has declined in the post-globalization period. These results hold whether we use the formulation of intertemporal preferences of the Bewley-Aiyagari-Hugget class of precautionary savings models or the Uzawa-Epstein setup with endogenous time preference
Are asset price guarantees useful for preventing sudden stops? a quantitative investigation of the globalization hazard-moral hazard tradeoff by Ceyhun Bora Durdu ( )
15 editions published between 2005 and 2006 in English and held by 255 WorldCat member libraries worldwide
"The globalization hazard hypothesis maintains that the current account reversals and asset price collapses observed during 'Sudden Stops' are caused by global capital market frictions. A policy implication of this view is that Sudden Stops can be prevented by offering global investors price guarantees on emerging markets assets. These guarantees, however, introduce a moral hazard incentive for global investors, thus creating a tradeoff by which price guarantees weaken globalization hazard but strengthen international moral hazard. This paper studies the quantitative implications of this tradeoff using a dynamic stochastic equilibrium asset-pricing model. Without guarantees, distortions induced by margin calls and trading costs cause Sudden Stops driven by Fisher's debt-deflation mechanism. Price guarantees prevent this deflation by introducing a distortion that props up foreign demand for assets. Non-state-contingent guarantees contain Sudden Stops but they are executed often and induce persistent asset overvaluation. Guarantees offered only in high-debt states are executed rarely and prevent Sudden Stops without persistent asset overvaluation. If the elasticity of foreign asset demand is low, price guarantees can still contain Sudden Stops but domestic agents obtain smaller welfare gains at Sudden Stop states and suffer welfare losses on average in the stochastic steady state"--National Bureau of Economic Research web site
Macro-prudential policy in a Fisherian model of financial innovation by Javier Bianchi ( )
8 editions published in 2012 in English and held by 204 WorldCat member libraries worldwide
The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be learned over time. Beliefs about transition probabilities across states with high and low ability to borrow change as agents learn from observed realizations of financial conditions. At the same time, the collateral constraint introduces a pecuniary externality, because agents fail to internalize the effect of their borrowing decisions on asset prices. Quantitative analysis shows that the effectiveness of macro-prudential policy in this environment depends on the government's information set, the tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is least effective when the government is as uninformed as private agents, credit constraints are tight, and optimism builds quickly
Real exchange rate volatility and the price of nontradables in sudden-stop-prone economies by Enrique G Mendoza ( )
6 editions published in 2006 in English and held by 191 WorldCat member libraries worldwide
This paper shows that the dominant view that the high variability of real exchange rates is due to movements in exchange rate-adjusted prices of tradable goods does not hold for Mexican data for periods with a managed exchange rate. The relative price of nontradables accounts for up to 70 percent of real exchange rate variability during these periods. The paper also proposes a model in which this fact, and the sudden stops that accompanied the collapse of Mexico's managed exchange rates, could result from a Fisherian debt-deflation mechanism operating via nontradables prices in economies with dollarized liabilities
Supply-side economics in a global economy by Enrique G Mendoza ( Book )
14 editions published in 1995 in English and held by 103 WorldCat member libraries worldwide
Recent quantitative studies predict large welfare gains from reducing tax distortions in a closed economy, despite costly transitional dynamics to more efficient tax systems. This paper examines transitional dynamics and gains of tax reforms for countries in a global economy, and provides numerical solutions for international tax competition games. Tax reforms in a global economy cause cross-country externalities through capital flows in response to consumption-smoothing and debt-servicing effects, with taxes on world payments affecting the distribution of welfare gains. Within the class of time-invariant tax rates, the gains of replacing income taxes with consumption taxes are large and, in the absence of taxes on foreign assets, the monopoly distortion separating cooperative and noncooperative equilibria is negligible. The analysis starts from a benchmark reflecting current G-7 fiscal policies, and considers the effects of tax reforms on real exchange rates and interest differentials. Tax-distorted equilibrium dynamics are computed using a modified version of the King-Plosser-Rebelo algorithm augmented with shooting routines
Effective tax rates in macroeconomics : cross-country estimates of tax rates on factor incomes and consumption by Enrique G Mendoza ( Book )
11 editions published between 1994 and 1995 in English and held by 95 WorldCat member libraries worldwide
This paper proposes a method for computing tax rates using national accounts and revenue statistics. Using this method we construct time-series of tax rates for large industrial countries. The method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases. This method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework. These tax rates compare favorably with existing estimates of marginal tax rates, and highlight important international differences in tax policy
The international macroeconomics of taxation and the case against European tax harmonization by Enrique G Mendoza ( Book )
10 editions published in 2001 in English and held by 84 WorldCat member libraries worldwide
The theory of international macroeconomics shows that domestic tax policy in a global economy affects foreign economic conditions via complex, dynamic interactions through relative prices, tax revenues, and wealth distribution. This paper proposes a tractable quantitative framework for assessing tax policies that is consistent with this theory. The significance of the international transmission channels of tax policy is evaluated in the context of a 'workhorse' two-country dynamic general equilibrium model. The model is used to assess the potential effects of the European harmonization of capital income taxes. The results show that this policy, if enacted along the lines followed in harmonizing value-added taxes, yields large capital outflows and a significant erosion of tax revenue for Continental Europe while the opposite effects benefit the United Kingdom. Welfare in the United Kingdom rises as result, while Continental Europe may incur a substantial welfare cost
The business cycles of balance-of-payment crises : a revision of a Mundellian framework by Enrique G Mendoza ( Book )
10 editions published in 1999 in English and held by 80 WorldCat member libraries worldwide
In his seminal 1960 article Robert Mundell proposed a model of balance-of-payments crises in which confidence in the continuation of a currency peg depended on the observed holdings of central bank foreign reserves. We examine the implications of a reformulation of this view from the perspective of an equilibrium business cycle model in which the probability of devaluation is an endogenous variable conditioned on foreign reserves. The model explains some business cycle regularities of exchange-rate-based stabilizations while also producing devaluation probabilities that capture some features of devaluation probabilities estimated in the data. The analysis aims to explain both the real effects and the collapse of temporary fixed-exchange-rate regimes in an unified framework, and provides an economic interpretation for the evidence that foreign reserves are a robust leading indicator of currency crises
On the benefits of dollarization when stabilization policy is not credible and financial markets are imperfect by Enrique G Mendoza ( Book )
10 editions published in 2000 in English and held by 80 WorldCat member libraries worldwide
This paper examines two potential benefits that emerging economies may derive from dollarization. First, dollarization may eliminate distortions induced by the lack of credibility of monetary policy. Second, dollarization may weaken financial frictions that result in endogenous credit constraints. The analysis is based on numerical simulations of a two-sector dynamic, stochastic general equilibrium model calibrated to Mexican data. The results indicate that policy uncertainty and credit constraints are very costly distortions. The mean welfare gains of eliminating policy uncertainty range between 6.4 and 9 percent of the trend level of consumption per capita. The mean welfare gain of weakening credit frictions is about 4.6 percent
Credit, prices, and crashes : business cycles with a sudden stop by Enrique G Mendoza ( Book )
9 editions published in 2001 in English and held by 78 WorldCat member libraries worldwide
The 1990s emerging-markets crises were characterized by sudden reversals in inflows of foreign capital followed by unusually large declines in current account deficits, private expenditures, production, and prices of nontradable goods relative to tradables. This paper shows that these Sudden Stops can be the outcome of the equilibrium dynamics of a flexible-price economy with imperfect credit markets. Foreign debt is denominated in units of tradables and a liquidity constraint links credit-market access to the income generated in the nontradables sector and the relative price of nontradables. Sudden Stops occur when real shocks of foreign or domestic origin, or policy-induced shocks make this constraint binding. Sudden Stops are not reflected in long-run business cycle statistics but still they entail nontrivial welfare costs. These results question crises-management policies seeking to impose direct controls on private capital flows and favor those that work to weaken credit frictions
Rational contagion and the globalization of securities markets by Guillermo A Calvo ( Book )
9 editions published in 1999 in English and held by 78 WorldCat member libraries worldwide
This paper argues that the globalization of securities markets may promote contagion among investors by weakening incentives for gathering costly country-specific information and by strengthening incentives for imitating arbitrary market portfolios. In the presence of short-selling constraints, the utility gain of gathering information at a fixed cost converges to a constant level and may diminish as securities markets grow. Moreover, if a portfolio manager's marginal cost for yielding below-market returns exceeds the marginal gain for above-market returns, there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows. Numerical simulations suggest that these frictions can have significant quantitative implications and they may induce large capital flows in emerging markets
Devaluation risk and the syndrome of exchange-rate-based stabilizations by Enrique G Mendoza ( Book )
10 editions published in 1999 in English and held by 78 WorldCat member libraries worldwide
This paper shows that the risk of devaluation can be an important factor accounting for the stylized facts of exchange-rate-based stabilizations. This conclusion follows from studying the quantitative implications of a two-sector equilibrium business cycle model of a small open economy calibrated to Mexico's 1987-1994 stabilization plan. In the model a time-variant interest rate differential that acts as a stochastic tax on money demand, labor supply, investment, and saving. Under incomplete markets, this tax induces endogenous state-contingent wealth effects via fiscal adjustment and suboptimal investment. Devaluation risk entails large welfare costs in this environment
Why should emerging economies give up national currencies : a case for 'institutions substitution' by Enrique G Mendoza ( Book )
10 editions published in 2002 in English and held by 78 WorldCat member libraries worldwide
Financial contagion and Sudden Stops of capital inflows experienced in emerging-markets crises may originate in an explosive mix of lack of policy credibility and world capital market imperfections that afflict emerging economies with national currencies. Hence, this paper argues that abandoning national currencies to adopt a hard currency can significantly reduce the emerging countries' vulnerability to these crises. The credibility of their financial policies would be greatly enhanced by the implicit subordination to the policy-making institutions of the hard currency issuer. Their access to international capital markets would improve as the same expertise and information that global investors gather already to evaluate the monetary policy of the hard currency issuer would apply to emerging economies. Yet, adopting a hard currency does not eliminate business cycles, rule out all forms of financial crises, or solve severe fiscal problems that plague emerging economies, and it entails giving up seigniorage and potential benefits of conducting independent monetary policy. However, these disadvantages seem dwarfed by the urgent need to enable emerging countries to access global capital markets without exposing them to the risk of recurrent Sudden Stops
On the instability of variance decompositions of the real exchange rate across exchange-rate-regimes : evidence from Mexico and the United States by Enrique G Mendoza ( Book )
9 editions published in 2000 in English and held by 77 WorldCat member libraries worldwide
Variance decompositions of the Mexico-United States real exchange rate are examined using monthly data on consumer prices and the nominal exchange rate for the period January, 1969 to February, 2000. The results show that the robust result found in industrial-country data that most of the variation of the real exchange rate is due to fluctuations in prices of tradable goods and nominal exchange rates holds only in periods in which Mexico was not under a regime of exchange-rate management. In periods in the sample in which Mexico had a managed exchange-rate regime, the variability of prices of non-tradable goods relative to tradable goods accounts for up to 70 percent of the variability of the peso-dollar real exchange rate
International evidence on fiscal solvency is fiscal policy "responsible"? by Enrique G Mendoza ( )
13 editions published in 2007 in English and held by 77 WorldCat member libraries worldwide
"This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries, as well as in the sample as a whole. Evidence of fiscal solvency is much weaker, however, at high debt levels. The debt-primary balance relationship weakens considerably in emerging economies as debt rises above 50 percent of GDP. Moreover, the relationship vanishes in high-debt countries when the countries are split into high- and low-debt groups relative to sample means and medians, and this holds for industrial countries, emerging economies, and in the combined sample. These findings suggest that many industrial and emerging economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios, where the response of the primary balance to increases in debt is not statistically significant"--National Bureau of Economic Research web site
Credit frictions and 'sudden stops' in small open economies : an equilibrium business cycle framework for emerging market crises by Cristina Arellano ( Book )
11 editions published in 2002 in English and held by 76 WorldCat member libraries worldwide
Financial frictions are a central element of most of the models that the literature on emerging markets crises has proposed for explaining the Sudden Stop' phenomenon. To date, few studies have aimed to examine the quantitative implications of these models and to integrate them with an equilibrium business cycle framework for emerging economies. This paper surveys these studies viewing them as ability-to-pay and willingness-to-pay variations of a framework that adds occasionally binding borrowing constraints to the small open economy real-business-cycle model. A common feature of the different models is that agents factor in the risk of future Sudden Stops in their optimal plans, so that equilibrium allocations and prices are distorted even when credit constraints do not bind. Sudden Stops are a property of the unique, flexible-price competitive equilibrium of these models that occurs in a particular region of the state space in which negative shocks make borrowing constraints bind. The resulting nonlinear effects imply that solving the models requires non-linear numerical methods, which are described in the survey. The results show that the models can yield relatively infrequent Sudden Stops with large current account reversals and deep recessions nested within smoother business cycles. Still, research in this area is at an early stage and this survey aims to stimulate further work
A quantitative analysis of tax competition v. tax coordination under perfect capital mobility by Enrique G Mendoza ( Book )
8 editions published in 2003 in English and held by 75 WorldCat member libraries worldwide
Theory predicts that strategically-determined tax rates induce negative externalities across countries in relative prices, the wealth distribution and tax revenue. This paper studies the interaction of these externalities in a dynamic, general equilibrium environment and its effects on quantitative outcomes of tax competition in one-shot games over capital income taxes between two governments that set time-invariant taxes and issue debt. Strategic payoffs correspond to welfare gains net of the cost of transitional dynamics in a standard neoclassical two-country model with exogenous balanced growth. The model is calibrated to European data for the early 1980s starting from a benchmark with symmetric countries. When countries compete over capital taxes adjusting labor taxes to maintain fiscal solvency, the Nash equilibrium replicates calibrated taxes, suggesting that European taxes can be the outcome of Nash competition. When consumption taxes are adjusted to maintain fiscal solvency, competition triggers a race to the bottom' in capital taxes but this outcome is welfare-improving relative to calibrated taxes. Sensitivity analysis shows that competition can produce a race to the top' in capital taxes and that the United Kingdom can benefit from tax competition with Continental Europe. Surprisingly, the gains from coordination in all of these experiments are small
Margin calls, trading costs, and asset prices in emerging markets : the financial mechanics of the 'sudden stop' phenomenon by Enrique G Mendoza ( Book )
7 editions published in 2002 in English and held by 71 WorldCat member libraries worldwide
A central feature of emerging markets crises is the Sudden Stop' phenomenon characterized by large reversals of capital inflows and current accounts, deep recessions, and collapses in asset prices. This paper proposes an open-economy asset-pricing model with financial frictions that yields predictions in line with these observations. Margin requirements and information costs distort asset trading between a small open economy and foreign securities firms. If the economy's debt-equity ratio is low, standard productivity shocks cause normal recessions with smooth current-account adjustments. If the ratio is high, the same productivity shocks trigger margin calls forcing domestic agents to firesell equity to foreign traders who are slow to adjust their portfolios. This sets off a Fisherian asset-price deflation and subsequent rounds of margin calls. A current account reversal and a collapse in consumption occur if the fire-sale of assets cannot prevent a sharp increase in net foreign asset holdings
Financial innovation, the discovery of risk, and the U.S. credit crisis by Emine Boz ( )
17 editions published between 2004 and 2010 in English and held by 71 WorldCat member libraries worldwide
Uncertainty about the riskiness of a new financial environment was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness of the new environment. Early realizations of states with high ability to leverage assets into debt turn agents overly optimistic about the probability of persistence of a high-leverage regime. Conversely, the first realization of the low-leverage state turns agents unduly pessimistic about future credit prospects. These effects interact with the Fisherian deflation mechanism, resulting in changes in debt, leverage, and asset prices larger than predicted under either rational expectations without learning or with learning but without Fisherian deflation. The model can account for 69 percent of the rise in net household debt and 53 percent of the rise in residential land prices between 1997 and 2006, and it predicts a sharp collapse in 2007
Public debt, fiscal solvency and macroeconomic uncertainty in Latin America : the cases of Brazil, Colombia, Costa Rica and Mexico by Enrique G Mendoza ( Book )
7 editions published between 2004 and 2006 in English and held by 70 WorldCat member libraries worldwide
"Ratios of public debt as a share of GDP in Brazil, Colombia, and Mexico were 10 percentage points higher on average during 1996-2002 than in the period 1990-1995. Costa Rica's debt ratio remained stable but at a high level near 50 percent. Is there reason to be concerned for the solvency of the public sector in these economies? We provide an answer to this question based on the quantitative predictions of a variant of the framework proposed by Mendoza and Oviedo (2004). This methodology yields forward-looking estimates of debt ratios consistent with fiscal solvency for a government that faces revenue uncertainty and can issue only non-state-contingent debt. In this environment, aversion to a collapse in outlays leads the government to respect a "natural debt limit" equal to the annuity value of the primary balance in a "fiscal crisis". A fiscl crisis occurs after a long sequence of adverse revenue shocks and public outlays adjust to a tolerable minimum. The debt limit also represents a credible commitment to be able to repay even in a fiscal crisis but is not, in general, the same as the sustainable debt, which is driven by the probabilistic dynamics of the primary balance. The results of a baseline scenario question the sustainability of current debt ratios in Brazil and Colombia, while those in Costa Rica and Mexico seem inside the limits consistent with fiscal solvency. In contrast, public debt ratios are found to be unsustainable in all four countries for plausible changes to lower average growth rates or higher real interest rates. Moreover, sustainable debt ratios fall sharply when default risk is taken into account"--National Bureau of Economic Research web site
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Alternative Names
Estrada, Enrique Gabriel Mendoza 1963-
Mendoza, E. G. 1963-
Mendoza, Enrique 1963-
Mendoza, Enrique G.
Mendoza, Enrique Gabriel 1963-
Mendoza Estrada, Enrique G. 1963-
Mendoza-Estrada, Enrique Gabriel 1963-
English (211)