Handbook of Safeguarding Global Financial Stability

Handbook of Safeguarding Global Financial Stability

Political, Social, Cultural, and Economic Theories and Models

1st Edition - November 27, 2012

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  • Editor-in-Chief: Gerard Caprio
  • Hardcover ISBN: 9780123978752
  • eBook ISBN: 9780123978783

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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.

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

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

Table of Contents

  • 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

Product details

  • No. of pages: 754
  • Language: English
  • Copyright: © Academic Press 2012
  • Published: November 27, 2012
  • Imprint: Academic Press
  • Hardcover ISBN: 9780123978752
  • eBook ISBN: 9780123978783

About the Editor in Chief

Gerard Caprio

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

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