Abstract: The borrowing costs of emerging market economies have been substantially higher than those of developed countries, due to the premium paid for sovereign default risk. In order to help understand this phenomenon better, the first two chapters of this dissertation analyze default risk in emerging markets in relation to the currency denomination of debt and the exchange rate policy. The last chapter focuses on institutional quality by analyzing different institutional quality indicators and how they relate to economic growth. Chapter 1 analyzes the effect of currency denomination of debt on sovereign default risk and interest rates in emerging markets, using a small open economy model. In these countries, real exchange rate depreciations are associated with output declines, which increase the cost of foreign currency debt exactly when the repayment capacity is low, thereby hindering debt service. The model predicts that foreign currency debt increases default risk and leads to higher interest rates. In addition, holding this type of debt is shown to reduce both the amount of debt that can be sustained by the economy and the welfare level, while it increases the default rate and interest rate volatility. Chapter 2 empirically analyzes the relationship between exchange rate policy and sovereign default risk in emerging markets using two sets of exchange rate classifications: the announced exchange rate regimes (de jure ) and the actual exchange rate behavior (de facto). The results show that de facto fixed exchange rates lead to lower sovereign spreads, whereas no difference exists between intermediate flexibility and free float. On the other hand, when the de jure classification is used, exchange rate regime choice has no effect on sovereign spreads, suggesting that markets react to actual exchange rate behavior rather than the announcement of a certain regime. Chapter 3 studies two alternative indicators of institutional quality to better understand the characteristics of each index and assess their importance for economic growth. First, the relations between the individual categories in each index are analyzed. Then, a new grouping of each dataset is derived, which is used in explaining the relationship between institutional quality and economic growth. The results show that, even though these indicators aim to measure similar aspects of institutional quality, there are important differences between them in terms of both their individual characteristics and the way they perform in explaining growth.