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The Evidence and Impact of Financial Globalization
 
 

The Evidence and Impact of Financial Globalization, 1st Edition

 
The Evidence and Impact of Financial Globalization, 1st Edition,Gerard Caprio,ISBN9780123978745
 
 
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G Caprio   

Academic Press

9780123978745

9780124058996

800

281 X 222

Foundational articles describing imbalances, defaults, and crises in theory and in their actual manifestations

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Key Features

  • Substantial articles by top scholars sets this volume apart from other information sources
  • Rapidly developing subjects will interest readers well into the future
  • Reader demand and lack of competitors underline the high value of these reference works

Description

The sharp realities of financial globalization become clear during crises, when winners and losers emerge. Crises usher in short- and long-term changes to the status quo, and everyone agrees that learning from crises is a top priority. The Evidence and Impact of Financial Globalization devotes separate articles to specific crises, the conditions that cause them, and the longstanding arrangements devised to address them. While other books and journal articles treat these subjects in isolation, this volume presents a wide-ranging, consistent, yet varied specificity. Substantial, authoritative, and useful, these articles provide material unavailable elsewhere.

Readership

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

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

View additional works by Gerard Caprio

The Evidence and Impact of Financial Globalization, 1st Edition

Volume 3

Section Editors

Preface

Contributors

Chapter 1. Financial Globalization and Crises: Overview

Introduction

Evidence on Financial Globalization

Forces Behind Globalization

Effects of Financial Globalization

Monetary and Exchange Rate Policy under Financial Globalization

Crises

Final Words

Acknowledgment

References

I: Evidence on Financial Globalization

Chapter 2. Measurements of Capital and Financial Current Account Openness

Measuring Financial Integration

Coding

Data Properties

Uses of Measures

Conclusions

Acknowledgments

References

Chapter 3. Measurement and Impact of Equity Market Liberalization

Introduction

Equity Market Liberalization

Effects of Stock Market Liberalization

Conclusion

Acknowledgments

References

Further Reading

Chapter 4. Bilateral Financial Links

Introduction

Bilateral Data on External Assets and Liabilities

What Explains Bilateral External Financial Linkages?

Stylized Facts

Cross-Border Financial Links and International Transmission of Shocks

Conclusions

See also

Glossary

Supplementary Materials

Further Reading

Relevant Websites

Chapter 5. Global Imbalances

The Contested Landscape of Global Imbalances

Global Imbalances Defined

Spendthrift America and the Saving–Investment Approach

A US Productivity Surge and the Intertemporal Approach

East Asian Mercantilism and Bretton Woods II Versus Self-Protection

A Global Saving Glut?

Imbalances and the Financial Crisis

See also

Acknowledgments

Glossary

References

Chapter 6. Aid Flows

Introduction

Situating Aid Flows Within Financial Globalization

The Particularities of Aid Flows

Aid Effectiveness and the NAA

Interaction of Aid Flows with the Larger Global Financial Architecture

Appendix

See also

References

II: Forces Behind Globalization

Chapter 7. Composition of International Capital Flows: A Survey

What the Chapter Is About

Introduction

Home-Court Information Advantage

Debt Flows

Equity Flows and Liquidity Shocks

Moral Hazard in Debt Contracts Under Limited Enforcement

Role of Bonds in the Presence of Home Bias in Goods and Equities

Conclusion

Acknowledgment

Glossary

References

Chapter 8. Migrant Remittances and Development

Introduction

Remittances Reduce Poverty

Remittances Improve Health and Education Outcomes of Recipient Households

Remittances can Provide Funds for Small Business Investments and Entrepreneurial Activities

Remittances Tend to Remain Stable and are Often Countercyclical to Crises and Natural Disasters

Remittances can have Some Downsides

Remittances can have a Positive Impact on Economic Growth and Development in the Presence of Supportive Institutions

Remittances can Improve Access to Capital Markets

Cost of Sending Remittances has Declined Steadily, but Remains High in Some Corridors

Post Offices, Savings Cooperatives, and Mobile Money Transfers can Play an Important Role in Reaching the Poorest

Remittances Data Need to be Improved

The International Remittances Agenda

References

Chapter 9. International Mutual Funds, Capital Flow Volatility, and Contagion – A Survey

Introduction

Portfolio Choice, Fund Managers’ Incentives, and Consequences for Capital Flows

Transparency, Informational Asymmetries, Asset Allocation, and Capital Flow Volatility

Conclusions

Acknowledgments

Glossary

References

Chapter 10. Capital Raisings

Introduction

Developed World: Patterns and Effects of Cross-Border Capital Raisings

Emerging Markets

Capital Raisings During the 2007–09 Global Financial Crisis

Conclusion

See also

Glossary

References

Chapter 11. International Cross-listings

Introduction

Some New (and Old) Wisdom on International Cross-listings

The Current State of the World Market for International Cross-listings

Price Discovery, Multi-market Trading, and Arbitrage

The Dynamics of Multi-market Trading

Concluding Remarks

Acknowledgments

References

Chapter 12. Disclosure of Ownership and Public Companies

Introduction

The Enron and Parmalat Examples

Disclosure of Beneficial Ownership

Related Party Transactions

Disclosure of Beneficial Ownership of Corporate Vehicles

Conclusion

References

Chapter 13. Role of Trade Finance

Introduction

What is Trade Finance?

Risks Inherent in International Trade

Existing Evidence on Trade Finance Patterns Around the World

New Evidence on Trade Finance Patterns Around the World

Theories of Trade Credit and Trade Finance

Relationship Between Bank Credit and Trade Credit

Trade Credit Versus Bank Credit during the Financial Crisis

Trade Finance Behavior during the Most Recent Global Financial Crisis

Role for Policy Interventions to Support Trade Finance During the Crises

Conclusion

Glossary

References

Chapter 14. Foreign Bank Participation in Developing Countries

Introduction

Foreign Bank Participation in Developing Countries: Trends and Regional Patterns

The Drivers of Foreign Bank Entry

The Consequences of Foreign Bank Entry

Conclusions

Acknowledgments

Glossary

References

Chapter 15. Opportunistic Foreign Currency Debt Issuance

Introduction and Overview

Related Literature

Long-Term IRP

Opportunistic FC Debt Issuance

Conclusion

See also

Glossary

References

Chapter 16. International Government Debt

Introduction

Trends

The Theory of International Government Debt

Evidence on International Borrowing and Default

Debt Structure and Debt Crises

Conclusions

See also

Acknowledgment

Glossary

References

Chapter 17. Carry Trade

Introduction

Designing Carry Trade Strategies

A Trading Laboratory for the Carry Trade

The Trader’s Decision Problem

Adjusting for Returns: KS*, AUC*, and Gain–Loss Ratio

Are Carry Trade Returns Compensation for Risk?

Conclusion

Glossary

Further Reading

III: Effects of Financial Globalization

Chapter 18. Capital Market Integration

The Empirics of Financial Globalization and Growth

Statistical Tests for Crisis Impacts of Openness

Studies of Historical Crisis Incidence and Costs

Calibrating Ranges for Costs of Openness-induced Crises

Evidence from the Global Crisis of 2007–09

Conclusion

See also

Glossary

References

Chapter 19. Collateral Benefits of Financial Globalization

Introduction

What Are the Theoretical Arguments for Collateral Benefits?

What Does the Empirical Evidence Say?

Does Financial Integration Enhance Productivity Growth?

Conclusion

Acknowledgments

References

Chapter 20. Foreign Direct Investment and Growth

Introduction

Overview of the Recent Empirical Literature

Complementarities

Channels, Mechanisms, and Linkages

Concluding Comments

See also

Glossary

References

Chapter 21. International Technology Transfer and Foreign Direct Investment

Introduction

Why should we Expect FDI to be a Source of Knowledge Transfer Across International Borders?

Evidence on Knowledge Transfer to Foreign Affiliates

Knowledge Externalities

Conclusions and Policy Implications

Glossary

References

Chapter 22. Role of Multinational Corporations in Financial Globalization

Introduction

What Are the Determinants of FDI?

Are There Any Growth Effects of FDI?

Foreign Investment, Volatility, and Crises

Conclusion

References

Chapter 23. India’s Reintegration into the World Economy in the 1990s

From Autarky to Reintegration

Empirical Facts About Reintegration

Foreign Portfolio Investment in the Equity Market

The Role of FDI

Foreign Borrowing

Effectiveness of Capital Controls and the Exchange Rate Regime

Domestic Finance and International Finance

Policy Questions About Capital Controls and Monetary Policy

Glossary

Further Reading

Relevant Websites

Chapter 24. Reforms of China’s Banking System

Challenges and Opportunities for China’s Growing Economy and Developing Financial System

The Dominant Role of Banks in the Financial Sector

Further Reading

Chapter 25. Policy Issues of China’s Financial Globalization

China’s Capital Markets Grow in Both Importance and Scope

Monetary and Foreign Exchange Policy

Future Developments in China

See also

Glossary

Further Reading

Chapter 26. Financial Integration in Europe

Financial Integration and Financial Development

How Integrated are European Financial Markets?

Prospects for Security Market Integration

Prospects for Credit Market Integration

Concluding Remarks

See also

Glossary

References

IV: Monetary and Exchange Rate Policy Under Financial Globalization

Chapter 27. The Impossible Trinity (aka The Policy Trilemma)

The Trilemma and Mundell–Fleming’s Framework

The Trilemma Choices of Countries – Trends and Trade-offs

Testing the Trilemma

Beyond the Trilemma Triangle: International Reserves and the Impossible Trinity

The Trilemma and the Future Financial Architecture

See also

Glossary

References

Chapter 28. Financial Globalization and Monetary Policy

Introduction

Globalization and Long-Term Interest Rates

Exchange Rate Regimes and Short-Term Interest Rates

The Financial Crisis, Liquidity, and the Credit Channel

Conclusion

Acknowledgment

See also

Glossary

References

Chapter 29. Interest Rate Parity

Introduction and Overview

Origins and Theory of IRP

Limits to Arbitrage and Factors Associated with Parity Deviations

Empirical Evidence on IRP from the Last 50 years

Empirical Evidence on IRP During the Global Financial Crisis

Conclusion and Cautionary Notes on Parity Deviations

Appendix

References

Chapter 30. Exchange Rate Regimes

Introduction

Exchange Rate Regimes

Why do we Care about ERR?

Exchange Rate Policies in the Post-Bretton Woods Era

Taking Stock

References

Chapter 31. Currency Unions

Introduction

The Benefits

The Costs

Concluding Remarks

Acknowledgment

Glossary

References

Chapter 32. Financial Dollarization

Introduction

Background

Determinants

Empirical Evidence

Costs and Risks

The Policy Agenda

Conclusion

Acknowledgment

See also

Appendix

Glossary

References

V: Crises

Chapter 33. Models of Currency Crises

Introduction

Causes of Currency Crises

Association with Other Crises

Incidence of Currency Crises

Predicting Currency Crises

Effects of Currency Crises

See also

Glossary

References

Relevant Websites

Chapter 34. Predictive Indicators of Financial Crises

Survey of Early Warning Models

Early Warning Models by Investment Banks

IMF Work on Early Warning Systems

Conclusion

See also

References

Chapter 35. A Perspective on Predicting Currency Crises

Introduction

Literature Survey

A Model of Currency Crises

Data Generation

Estimating Crisis Probabilities

Accuracy of the Estimated Probabilities

Conclusion

Appendix: Data Used

References

Chapter 36. Empirical Literature on Financial Crises: Fundamentals vs. Panic

Introduction

Empirical Evidence on the Role of Fundamentals

What do we Learn from the Evidence about the Role of Panic?

How can we Test for Panic?

Conclusion

See also

Acknowledgments

Glossary

References

Chapter 37. Sudden Stops in Capital Flows

Introduction

Empirical Definition of a Sudden Stop and Evidence on the Costs of Sudden Stops

Costs of Sudden Stops

Determinants of Sudden Stops

Ex-ante Policies and Policy Responses to Sudden Stops

Conclusion

See also

Glossary

References

Chapter 38. Definitions and Types of Financial Contagion

Introduction

Definitions of Contagion

The Channels for Shock Transmission

The Empirical Literature on Contagion

Recent Examples of Contagion

See also

Further Reading

Chapter 39. Cross-Border Banking: Regulation, Supervision, and Crisis Resolution

Introduction

Significance of Cross-Border Banking

Importance of Incentive-Compatible Supervisory and Resolution Structures

Illiquid and Insolvent Banks

Prudential Supervision

Conclusion

Glossary

Further Reading

Chapter 40. Market-Based Approach to Financial Architecture

Introduction

Postwar Background

Toward Financial Globalization 1971–80s

Financial Globalization and ‘Governance Light’ 1990–2007

Back to the Future of Instability and Crisis

See also

References

Chapter 41. Housing Is the Business Cycle

Introduction to the Revision

Introduction

The 3–3 Rule of US Real GDP

Temporal Orderings of Components of GDP

Multivariate Confirmation: It is a Consumer Cycle, not a Business Cycle

Hormones and Housing: It has been a Volume Cycle, not a Price Cycle

New Homes Nationwide have a Volume Cycle, not a Price Cycle, too

This Time was Different

The Phases of the Housing Financial Cycle: Hope, Hype, and Havoc

The Conflicts between Housing and Inflation Targeting

By the Way

Conclusion

Appendices

References

Chapter 42. US Stock Market Crisis of 1987

Introduction

Background

Timeline of the Crash

Factors That Contributed to the Severity of the Crash

Response of the Federal Reserve

Conclusion

See also

Glossary

Further Reading

Chapter 43. Mexican Financial Crisis of 1994–1995

Origins of the Crisis

The Consequences of Financial Liberalization

The System under Stress in 1994

Consequences of the 1994 Crisis

What did Mexico Gain in the Long Term?

Glossary

References

Further Reading

Chapter 44. East-Asian Crisis of 1997

Introduction

Origins of the Crisis

Dimensions of Vulnerability and Their Causes

Onset of the Crisis and the Role of Contagion

Why Was the Crisis So Protracted?

Conclusions

References

Chapter 45. Financial Globalization and the Russian Crisis of 1998

Introduction

Russia’s 3-year Road to the 1998 Crisis

Financial Globalization and Russia 1998

Lessons and Insights from Russia 1998

Concluding Remarks

See also

Acknowledgment

Glossary

References

Chapter 46. Argentina’s Default of 2001

Introduction

Economic Performance Under the Convertibility Plan, 1991–98

Economic Difficulties, 1998–2001

Economic and Political Background

The Default and Its Aftermath

See also

Glossary

References

Chapter 47. Assessment of Solutions to US Financial Crisis of 2008–09

Introduction

Measures Introduced between September 2008 and Mid-2009

Cross-Country Snapshot as of June 2009

Effect of Government Rescue Measures on Banks

What Happened After June 2009: A Brief Update

Glossary

Further Reading

Relevant Websites

Chapter 48. A Cross-Country Perspective on the Causes of the Global Financial Crisis

Introduction

Causes of the Crisis

The Evolution of the Crisis

Conclusions: Crisis Resolution Going Forward and the Path to Economic Recovery

See also

References

Chapter 49. Lessons and Policy Implications from the Global Financial Crisis

Introduction

Lessons for Macroeconomic Policy

Lessons for Redesigning Prudential Regulation and Supervision

Lessons for Reform of the International Financial Architecture

Conclusion

References

Index

Quotes and reviews

"Editor Caprio…presents empirical research on the forces behind financial globalization, such as international capital flows, foreign bank participation in developing countries, and international government debt." --Reference and Research Book News, February 2013

"This volume provides authoritative non-technical coverage of key topics related to the  globalization of financial activities and institutions, with particular and up-to-date analyses of international financial crises." --Josef Brada, Arizona State University

"The Evidence and Impact of Financial Globalization is a collection of essays written by major specialists in each specific field of globalization, ranging from aid, foreign investment and migration to exchange rates, international government debt and financial crisis. Its 50 chapters investigate the various aspects of globalization, their determinants and impact both in abstract terms and with reference to specific countries and regions. It is an essential companion for those that want to up-date and improve their knowledge of the impressive significance acquired by financial globalization in the last two or three decades." --Nicola Acocella, Università degli Studi di Roma "La Sapienza"

"Is mainstream theory the cause of our recent financial crisis, and will it be to blame for future crises? If theory did not cause it, it did nothing to prevent or even mitigate it. This book offers an impressive series of essays on the Great Recession, investigating financial and real causes, historical episodes, and linkages as well as domino effects. It clearly illuminates the background of our recent crisis by offering clear theoretical, empirical, and historical views of its remote causes. It cannot be absent from any economist's bookshelf." --Mauro Gallegati, Università Politecnica delle Marche

 
 
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