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Handbook of Safeguarding Global Financial Stability
 
 

Handbook of Safeguarding Global Financial Stability, 1st Edition

Political, Social, Cultural, and Economic Theories and Models

 
Handbook of Safeguarding Global Financial Stability, 1st Edition,Gerard Caprio,ISBN9780123978752
 
 
 

G Caprio   

Academic Press

9780123978752

9780123978783

754

281 X 222

Substantial articles about the globalization of finance and ways that financial stability can be assured for undergraduates and graduate students

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Key Features

  • 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

Description

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..

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

Handbook of Safeguarding Global Financial Stability, 1st Edition

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

Quotes and reviews

"The Handbook of Safeguarding Global Financial Stability provides an essential resource for an integrated perspective on financial stability, incorporating advanced analysis that surpasses immediate reactions to the Global Financial Crisis. The views of key policymakers and accomplished scholars are brought together to illuminate financial stability from the perspective of the political economy, economic models, and regulatory functions."

--Heidi Mandanis Schooner, The Catholic University of America

 

"This book combines  high academic expertise and practitioners' insights into the Global Financial Crisis.  It is the kind of the book welcomed by academicians, practitioners, and policy makers who want to understand not only the complexity of this Crisis but financial crises in general."

--Roman Matousek, London Metropolitan Business School

 
 
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