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Handbook of Safeguarding Global Financial Stability
Political, Social, Cultural, and Economic Theories and Models
1st Edition - November 27, 2012
Editor: Gerard Caprio
Hardback ISBN:
9 7 8 - 0 - 1 2 - 3 9 7 8 7 5 - 2
eBook ISBN:
9 7 8 - 0 - 1 2 - 3 9 7 8 7 8 - 3
Political and social forces exert pressure on our globalized economy in many forms, from formal and informal policies to financial theories and technical models. Our efforts to… Read more
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Political and social forces exert pressure on our globalized economy in many forms, from formal and informal policies to financial theories and technical models. Our efforts to shape and direct these forces to preserve financial stability reveal much about the ways we perceive the financial economy. The Handbook of Safeguarding Global Financial Stability examines our political economy, particularly the ways in which these forces inhabit our institutions, strategies, and tactics. As economies expand and contract, these forces also determine the ways we supervise and regulate. This high-level examination of the global political economy includes articles about specific countries, crises, and international systems as well as broad articles about major concepts and trends.
- Substantial articles by top scholars sets this volume apart from other information sources
- Diverse international perspectives result in new opportunities for analysis and research
- Rapidly developing subjects will interest readers well into the future
Undergraduates and graduate students worldwide working in all areas of finance and economics. Researchers will typically be examining the global aspects and implications of their particular interests
Volume 2
Section Editors for this volume
Preface
Contributors
I: Political Economy of Financial Globalization
Chapter 1. China and Financial Globalization
Introduction
A Brief History of China’s Financial Opening
China’s Current Account and Saving Behavior in Cross-Country Context
Explanations for China’s High Saving
Conclusion
See also
Acknowledgments
Glossary
Further Reading
Chapter 2. Emerging Markets Politics and Financial Institutions
Introduction
Analytical Framework
Testing the Abiad–Mody Results on a Wider Sample
Differing Influences, Across Types of Countries and Types of Reform
Conclusion
Appendix
References
Chapter 3. The Political Economy of Exchange-Rate Policy
Introduction
Economic Explanations of Exchange-Rate Policy: Important but Insufficient
Preferences: The Demand for Exchange-Rate Policy
Institutions and Exchange-Rate Policy
Conclusion
See also
Glossary
Further Reading
Chapter 4. Financial Institutions, International and Politics
Introduction
Intellectual Background
International Financial Institutions: How Much Autonomy?
International Financial Institutions: Effects
Conclusion
See also
Glossary
Further Reading
Relevant Websites
Chapter 5. Political Economy of Foreign Aid, Bilateral
Political Economy of Aid Disbursement
Political Economy of Aid Receipt
Making Good
Conclusion
References
Chapter 6. Interest Group Politics
Political Economy Models of Economic Integration
Interest Groups
Distributional Implications of Financial Globalization
The Political Economy of Financial Globalization in Authoritarian Regimes
MNCs as Actors
Conclusion
See also
Glossary
Further Reading
Chapter 7. International Conflicts
International Conflict
Civil War and Domestic Conflict
Scholarship with Implications for the Study of War and Peace
Conclusion
Further Reading
Chapter 8. The Political Economy of International Monetary Policy Coordination
Introduction
The Potential Gains from International Coordination
The Problem: Exchange Rate Externalities
Exchange Rate Coordination: Motivation and Modalities
Conclusion
See also
Glossary
Further Reading
II: Theoretical Perspectives on Financial Globalization
Chapter 9. Theoretical Perspectives, Overview
Introduction
Net Capital Flows and the Current Account
Gross Capital Flows and the Structure of International Balance Sheets
Capital Flows and Crises
Exchange Rates as Asset Prices
Financial Globalization and the Policy Environment
Conclusions
See also
References
Chapter 10. Capital Mobility and Exchange Rate Regimes
Origins and Representation of the Policy Trilemma
Dynamics of Exchange Rate Regimes in the Modern Era
Capital Mobility in the Modern Era
Evidence on the Policy Trilemma
Other Economic Effects of the Exchange Rate Regime
Conclusion
See also
Glossary
References
Chapter 11. Microstructure of Currency Markets
Introduction
Currency Trading Models
From Micro to Macro
Micro Perspectives on Exchange Rate Puzzles
Conclusion
Glossary
Further Reading
Chapter 12. Intertemporal Approach to the Current Account
Introduction
Intertemporal Theories
Empirical Relevance of the Theory and its Implications
Conclusion
See also
Glossary
Further Reading
Chapter 13. Endogenous Portfolios in International Macro Models
Introduction
A Simple Example Model
General Properties of Approximate Solutions
Mathematical Foundations
Applications
Conclusion
See also
Glossary
References
Chapter 14. Financial Contagion
Introduction
Bank Balance Sheet Adjustments as a Channel of Contagion: The International Financial Multiplier
Financial Contagion Through Interbank Linkages
Bank Runs and Self-Fulfilling International Crises
See also
Glossary
Further Reading
Relevant Websites
Chapter 15. Financial Development and Global Imbalances
Introduction
Financial Globalization and Financial Underdevelopment: Stylized Facts
Explaining Global Imbalances: Financial Globalization with Financial Underdevelopment
Consequences of Global Imbalances
Global Imbalances with Cross-Country Heterogeneity in Growth
Conclusions
References
Chapter 16. Foreign Currency Debt
Introduction
Risks of Foreign Currency Debt
Reasons for Holding Foreign Currency Debt
Development of Local Bond Markets
Conclusion
References
Chapter 17. International Trade and International Capital Flows
Introduction
Conclusion
Glossary
References
Chapter 18. International Macro-Finance
Introduction
The Workhorse Model
Next Steps
See also
References
Chapter 19. Monetary Policy and Capital Mobility
Introduction
Growth in International Capital Mobility and Monetary Policy
Arguments for Improved Monetary Policy Under Increased Capital Mobility
Theoretical Arguments for Reduced Monetary Policy Quality
Empirical Evidence
Conclusion
See also
References
Chapter 20. Theory of Sovereign Debt and Default
Introduction
Why Do Countries Repay Their Debts?
Why Do Countries Borrow So Much?
Policy and Welfare
Conclusion
See also
Further Reading
Chapter 21. Tax Systems and Capital Mobility
Introduction: Implications of Globalization for Tax Systems
National Taxation and International Mobility
International Tax Coordination
Summary and Conclusions
Further Reading
Chapter 22. Trade Costs and Home Bias
Introduction
The Equity and Consumption Home Biases: Facts and Figures
Why Investors Would Hold Different Equity Portfolios?
Home Bias in Equities and the Hedging of Real Exchange Rate Risk
Home Bias in Equities and the Hedging of Nontradable Risk
Trade Costs and Portfolio Home Bias: Alternative Stories
Conclusion
Acknowledgments
References
Chapter 23. Explaining Deviations from Uncovered Interest Rate Parity
Introduction
Risk Premium with Representative Investors
Limited Participation
Deviations from Rational Expectations
Conclusion
References
Chapter 24. Valuation Effects, Capital Flows and International Adjustment
Introduction
Financial Globalization and Valuation Effects
International Portfolio Choice and Adjustment in Theory
Interpretation of the External Accounts
Concluding Remarks
See also
Further Reading
III: Safeguarding Global Financial Stability
Chapter 25. Safeguarding Global Financial Stability, Overview
Financial Stability
Establishing and Maintaining Financial Stability
Crisis Management and Avoidance
Global Approaches
Other Issues
See also
References
Chapter 26. Resolution of Banking Crises
Introduction
The 2007–09 Global Crisis: A Synopsis
Which Countries Had a Systemic Banking Crisis in 2007–09?
Policy Responses in the 2007–09 Crises: What Is New?
How Costly Are the 2007–09 Systemic Banking Crises?
Concluding Remarks
Appendix
Acknowledgment
Glossary
References
Chapter 27. Advantages and Drawbacks of Bonus Payments in the Financial Sector
Introduction
Principal–Agent Theory: Why Bonuses may be Beneficial
Why Ideal Contracts may well be Unavailable
Implications for Contracts in the Financial Sector
Assessing the Case for Profit-Related Pay
Are Financial Sector Bonuses Actually Deserved?
Arguments Against Restricting Financial Sector Bonuses
Some Technical Difficulties
Some Specific Practical Problems with Bonuses
Implementation
Concluding Comments
References
Chapter 28. Central Banks Role in Financial Stability
Introduction
The Broader Monetary and Financial Framework
Financial Stability: National or International?
Financial Stability Framework
Financial Stability Functions of Central Banks
Conclusion
References
Chapter 29. Organization, Supervision and Resolution of Cross-border Banking
Introduction
The Nordea Case
Subsidiary and Branch Organizations in Theory and Practice
Organization of Supervision and Crisis Management: Can National Responsibility Be Effective?
Conclusions: Need for Reform of the Architecture for Supervision and Crisis Management
References
Chapter 30. Dynamic Provisioning to Reduce Procyclicality in Spain
Introduction
The Housing Boom and Bust in Spain
The Introduction of Dynamic Provisions in Spain
Comparison with Other Countries: Peru and Colombia
Conclusions
See also
Glossary
Further Reading
Chapter 31. Varieties of European Crises
Introduction
A Brief Overview of the Varieties of Financial Crises with Illustrations from Europe
The Crises of the European Monetary System 1992–93 and Nordic Banking Crises
Europe in the Global Financial Crisis 2007–09
Concluding Remarks; Lessons from European Crises
See also
References
Chapter 32. The Financial Sector Assessment Program
Origins of the International Monetary Fund/World Bank Financial Sector Assessment Program
The Objectives of the FSAP
The Program’s First Decade: Milestones and Country Participation
Areas of Assessment
Standards Assessments in the FSAP
The Conduct of an Assessment
Further Reading
Relevant Websites
Chapter 33. Financial Sector Forum/Board
Establishment of the Financial Stability Forum
Initial Work
First Decade
From Financial Stability Forum to Financial Stability Board
Recent Developments
Evaluation of Role of FSF
Chapter 34. Financial Stability and Inflation Targeting
Introduction
The Separation of Monetary and Financial Policy
Does Price Stability Promote Financial Stability?
Does Price Stability Guarantee Financial Stability?
Does IT Constrain the Response to Financial Crises?
New Directions Following the 2007–09 Crisis
See also
Further Reading
Chapter 35. Financial Supervision in the EU
Introduction
Prudential Supervision
Conduct of Business
Supervisory Structures
New European Financial Supervisory Framework
Conclusions
References
Chapter 36. Groups: G-5, G-7/8, G-10, G-20, and Others
Introduction
A Short History of ‘G’ Group Cooperation
Existing ‘G’ Group Scholarship
Why Do Governments Participate in ‘G’ Groups?
‘G’ Group Functions
Conclusions: The G20 and Political Conflict
See also
Glossary
Further Reading
Relevant Websites
Chapter 37. Market Structures and Market Abuse
Introduction
Regulatory Rationale of Market Abuse Laws
Market Developments: Technology and Regulation
Advanced Trading Techniques and Market Abuse
Reforming the EU MAD
Conclusion
Glossary
Further Reading
Chapter 38. Development and Evolution of International Financial Architecture
Introduction
Metallic Standards
What Did Gold Provide?
Interwar
War and Redesign
Bretton Woods
Post-Bretton Woods
Conclusion
See also
Glossary
Further Reading
Chapter 39. On the Role of the Basel Committee, the Basel Rules, and Banks’ Incentives
Introduction
The Evolving Role of the Basel Committee on Banking Supervision
Basel Capital Requirements as Essential but not Sufficient Regulatory Tool
From Basel I to Basel III: What Has Changed?
What are the Unresolved Flaws of Basel Regulations?
Basel Regulation, Incentives, and Role of Pillars 2 and 3
References
Chapter 40. International Monetary Fund
Introduction
The Fund in June 2011
Criticisms of the IMF
Conclusions and Recommendations
See also
Acknowledgments
Further Reading
Relevant Website
Chapter 41. Innovations in Lender of Last Resort Policy in Europe
Introduction
Underlying Conceptual Issues
LoLR in the Euro Area under ‘Normal’ Market Conditions
LoLR in the Euro Area during ‘Exceptional Times’
Concluding Remarks
See also
References
Chapter 42. Micro and Macro Prudential Regulation
What Is Macroprudential Regulation?
Macroprudential Regulation and the Cycle
Valuation and Mark-to-Funding Accounting
Macroprudential Regulation Beyond the Cycle
Host- and Home-Country Regulation
Conclusion
Glossary
References
Chapter 43. Role and Scope of Regulation and Supervision
Key Issues
Instruments in a Regulatory Regime
Reducing the Probability of Failures
Minimizing the Cost of Bank Failures
Summary of the Argument
Further Reading
Chapter 44. Independence and Accountability of Regulatory Agencies
Introduction
Independence and Accountability in Theory
Independence and Accountability in Practice
References
Chapter 45. Institutional Structures of Regulation
Introduction
Institutional Structures of Supervision
The Role of the Central Bank
References
Chapter 46. Organizations of International Co-operation in Standard-Setting and Regulation
International Financial Regulation
International Financial Standards and Standard-Setting Organizations
Policy Direction
Coordination
Key Standards for Sound Financial Systems
Process of Standard Setting
International Standard-Setting Organizations
IFIs and Other Formal International Organizations
International Financial Organizations
Implementation and Monitoring
References
Chapter 47. Prevention of Systemic Crises
How the Financial System should be Structured
How the Financial System should be Regulated
How Prudence can be Encouraged
How Crisis Resolution Tools can Contribute to Prevention
See also
Glossary
Further Reading
Chapter 48. Lines of Defense Against Systemic Crises: Resolution
International Efforts to Promote Effective Resolution Regimes
FSB Policy Measures to Reduce Moral Hazard Risks
A New International Standard for Resolution Regimes
Building Cross-Border Cooperation
Corporate Insolvency
National and Regional Initiatives
Objectives of Resolution
A Special Resolution Regime for Banks and Other Financial Institutions
Resolution Regimes as Key Component of the Financial Safety Net
Features of a Special Resolution Regime: The ‘FSB Key Attributes’
Conclusion
Further Reading
Index
- No. of pages: 754
- Language: English
- Published: November 27, 2012
- Imprint: Academic Press
- Hardback ISBN: 9780123978752
- eBook ISBN: 9780123978783
GC
Gerard Caprio
Gerard Caprio is William Brough Professor of Economics and Chair, Center for Development Economics at Williams College. He has served as the Head of Financial Sector Policy at The World Bank and Vice President and Head of Global Economics at J.P. Morgan.
Affiliations and expertise
Williams College,
Williamstown, MA