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WILLIAM H. L. DAY

Under the systems of pegged and managed spot exchange rates, short-term capital flows have frequently been disruptive. To relieve pressure on international reserves and the money stock, a policy of supporting both the spot and forward exchange rates has been undertaken occasionally. Experience suggests, however, that such a policy may be costly, as shown by the loss made by the Bank of England after the devaluation of sterling in 1967, and ineffective, as illustrated by the “merry-go-round” effect induced by the policy of the Deutsche Bundesbank.1 Owing to the experiences of the Bank of England and the Bundesbank, countries have become reluctant to give large-scale support to the forward market. Exchange controls and greater exchange rate flexibility have become the preferred means of combating disruptive capital flows.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Official export credit agencies (ECAs), a key pillar of the international financial architecture in the second half of the twentieth century, financed a significant share of exports from industrialized countries and provided larger debt financing for developing countries than either multilateral or bilateral creditors. Since the early 1990s, however, the world has changed dramatically. As noted in a conference in 2000 on the role of the U.S. Export-Import Bank in the twenty-first century, private credit insurance companies have “increasingly occupied the market” while “government-insured export business tends to account for a shrinking share of total exports in the major exporting countries.”1 Indeed, globalization, fueled by privatization and trade and capital liberalization, has significantly altered the landscape of international trade finance in recent years.2 Yet there are more ECAs than ever before, as developing countries launch agencies of their own.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Official export credit agencies were established originally to promote national exports in situations where the private sector was reluctant to do so due to high political and commercial risks. Because their support for exporters also gives importers access to finance (through buyer or supplier credit), and because most agencies also provide insurance for outward direct investment, these institutions have played a significant role in financing for developing countries. However, official export credit agencies are not a homogenous group. Their key mandates and the institutional arrangements for providing official export credit support are summarized in Boxes 2.1 and 2.2. The first box also presents background information on the trade finance market, including key trade finance providers besides official export credit agencies.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

The decisions of the OECD governments to further reduce subsidies and to downsize government-supported businesses in the early 1990s were key factors in setting in motion the retreat of official agencies as suppliers of short-term export credits in industrial countries. Both national and international policies have also had a direct impact on the level, destination, and sectoral allocation of officially supported export credits. The subsequent rise of the private sector represents a fundamental force reshaping the landscape of international trade finance, with long-term implications for official agencies.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

The evidence and analysis in the preceding chapters indicate that, while the promotion of national exports remains the principal role of official export credit agencies, the focus of these agencies has been changing, with notable differences between industrial and developing countries. Official ECAs in industrial countries continue to fill in the trade finance gaps in markets where private sector financing is unavailable or insufficient; but in recent years, a significant share of ECA support has gone to keep national exporters competitive in global markets by countering foreign government support provided to competitors. This is particularly the case in sectors with economies of scale and noncompetitive market structure, such as aircraft and military equipment.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Over the past decade, the private sector has grown to become capable of providing trade financing adequately and competitively in certain markets previously dominated by official export credit agencies. Official ECAs also have to deal with two other sources of competition originating from economic development in recipient countries: the expansion of domestic banking capacity, and improved access of borrowing countries to other sources of international financing as their income level and creditworthiness rise. The current top markets of ECAs may eventually become self-sufficient in meeting the financing needs for their capital goods imports and even in large project financing. (For instance, such was the case in Spain in the 1960s, Korea in the 1980s, and Mexico and possibly China more recently.) If these factors continue to develop, official ECAs’ share in world trade may decline further. Especially in OECD countries, official ECAs are facing the challenge of private sector competition and an associated adverse selection problem—how to break even while covering the riskiest segments of the market.

International Monetary Fund

This technical note presents a comparative analysis of the Danish Mortgage Market. It discusses the particularities of the regulatory framework of the Danish mortgage system. The note compares and contrasts mortgage financing in Denmark and in other European countries, looking both at the product side and at the funding side. Recent European regulatory evolutions, which could have potentially far-reaching consequences for the Danish mortgage system, are elaborated. The note also highlights the challenges faced by the Danish mortgage system.

International Monetary Fund

This technical note discusses the structure of the Danish capital market and related issues. The focus is on the organization and functioning of domestic securities markets. The note provides a regional perspective on these markets. It reviews the prudential framework for capital markets, and analyzes the progressive integration and collaboration among the Scandinavian stock exchanges. The note also discusses liquidity in Danish capital markets, as well as analyzes the rapid growth of Danish investment funds.

International Monetary Fund

Denmark’s flexicurity model has performed well during the crisis. The actions and the improvement in economic conditions have restored overall stability to the banking system. Private consumption has been dented by the decline in housing prices and net household wealth. Exports have rebounded, led by a reversal in the services account. Labor market policies should refocus on labor supply pressures. Additional action should be taken to further bolster financial sector stability. Policies need to focus on putting growth on a steady and sustainable path while reducing vulnerabilities.