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Western Hemisphere > Argentina

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Cover International Capital Markets, August 2001
International Capital Markets, August 2001
Mr. Donald J Mathieson
and
Mr. Garry J. Schinasi

Abstract

This paper reports the on-off nature of emerging market access to international capital markets appears to have become a key characteristic of international financial markets. Emerging market borrowers have begun to adapt: when the market for US dollar-denominated bonds has closed, these borrowers turn to the syndicated loan markets, attempt to issue in bonds denominated in euro or yen, or issue in local-currency bond markets. In addition, they employ staff with extensive experience in investment banking and securities trading, exploit “windows of opportunity” to prefund their yearly financing requirement, and engage in debt exchanges to extend the maturity of their debt and avoid a bunching of maturities. The consolidation of financial institutions is driven by attempts to exploit economies of scale and scope, and technological advances such as the Internet and deregulation that facilitate universal banking activities are making it easier to reap such economies. Advances in technology are also transforming the securities trading industry.

Keywords:
WEFS; market; market participant; yield; bank; asset; government securities market; market illiquidity; government securities; market discipline; Emerging and frontier financial markets; Government securities; Securities markets; Securities; Stock markets; Global; Europe; Asia and Pacific; Middle East; Western Hemisphere
Cover IMF Working Papers
How Does U.S. Monetary Policy Influence Economic Conditions in Emerging Markets?
Mr. Vivek B. Arora
and
Mr. Martin D. Cerisola
This paper quantifies the economic impact of changes in U.S. monetary policy on emerging market countries. We explore empirically how country risk, as proxied by sovereign bond spreads, is influenced by U.S. monetary policy, country-specific fundamentals, and conditions in global capital markets. In addition, we simulate the direct effects of a tightening in U.S. monetary policy on economic conditions in developing countries. While country-specific fundamentals are important in explaining fluctuations in country risk, the stance and predictability of U.S. monetary policy are also important for stabilizing capital flows and capital market conditions and fostering economic growth in developing countries.
Keywords:
WP; monetary policy; interest rate; country risk; market turbulence; U.S. monetary policy; emerging markets; sovereign bond spreads; herding; contagion; Multimod; interest rate increase; bond issue; flight to quality; market volatility; Treasury bill yield; interest rate volatility; interest-rate spread; emerging market bond; sovereign spread; Treasury yield; Emerging and frontier financial markets; Debt service ratios; Sovereign bonds; Treasury bills and bonds; Global
Cover Current Developments in Monetary and Financial Law, Vol. 1
Current Developments in Monetary and Financial Law, Vol. 1
International Monetary Fund

Abstract

The papers published in this volume are based on an IMF seminar held in 1988 covering a broad range of topics dealing with monetary and financial law. Topics presented at the seminar focused on the liberalization of capital movements, data dissemination, the IMF's goals in financial surveillance and architecture, and responses to the financial crises in Asia and Latin America. Recent issues in the financial sector were addressed including the supervision of banks and the major international effort- the Basle Core Principles of Banking Supervision. Updates on insolvency and liquidation of banks as well as lender-of-last-resort issues were presented along with how payment systems are adjusting to continuous financial modernization and the resulting legal issues. The activities of the European Economic and Monetary Union (EMU) were discussed from several viewpoints as was the issue of good governance. Information was also provided on the developments in the enforcement of bank claims and the law of security.

Keywords:
SEM; bank; central bank; bank regulator; certificate; consumer; bank supervisor; securities entitlement; e-money product; securities certificate; Securities; Government securities; Currencies; Capital flows; Global; East Asia; Europe; Western Europe; Middle East; Asia and Pacific; Central Asia; North America
Cover IMF Working Papers
Government Expenditure Arrears: Securitization and Other Solutions
Mr. Alberto M. Ramos
On occasions, by running arrears, governments have unilaterally borrowed from domestic agents. These agents ended up with implicit claims on the government for which they had no title and that would be honored, at best, on an unspecified future date and for an uncertain value. Having untitled assets limits creditors’ financial management capacity, because they cannot trade or enforce these claims. This paper presents several options for addressing the arrears problem. It recommends that the government recognize its implicit financial liabilities, set a timetable for their clearance, and issue market-negotiable titles (securitize). Several country experiences with securitization operations are documented.
Keywords:
WP; aggregate demand; cash budget; government arrears; arrears problem; debt service; immediate payment; Treasury bill holder; BRO countries; Securitization; Russia; payment arrears; securitization operation; Arrears; Securities; Stocks; Treasury bills and bonds; Currencies; Baltics
Cover IMF Working Papers
Brady Bonds and Default Probabilities
Ivailo Izvorski
This paper computes the default probabilities implicit in the prices of Brady bonds of seven developing countries and examines the factors that determine the high cross-correlation of the probability paths. The term structure of U.S. interest rates and the ratio of long-term foreign debt to GDP, together with a developing market index, explain more than 75 percent of the cross-sectional distribution of the default probabilities. The paper also demonstrates a new way to extract sovereign riskiness, implicit in traded bond prices. This allows the above results to be interpreted as explaining the cross-sectional distribution of sovereign riskiness as well.
Keywords:
WP; default probability; default; bond; price; Brady bonds; default probabilities; sovereign riskiness; Brady bond issuer; discount Brady bonds; probability of default; default probabilities Index; Bonds; Collateral; Yield curve; Asset prices; Treasury bills and bonds; Eastern Europe
Cover IMF Working Papers
The Brady-Euro Yield Differential Debate: Why Arbitrage is Infeasible
Federico L. Kaune Moreno
and
Ms. Elaine Karen Buckberg
Brady bonds offer substantially higher returns than Eurobonds. This paper examines the Brady and Eurobond markets for developing country debt and finds that the apparent arbitrage opportunity is not only smaller than it at first appears, but is infeasible given the illiquidity of the Eurobond market. The maturity adjusted return differential between Brady and Eurobonds is smaller than the commonly cited yield spreads. Moreover, the transactions costs of executing a Eurobond short contract render arbitrage a loss-making proposition. Given the many crossover investors who are active in both the Brady and Euro markets, why do Eurobond investors not trade them actively?
Keywords:
WP; yield; Eurobond issue; Eurobond; quoted yield differential; Brady bond; differential debate; Eurobond yield series; yield premium; Bonds; International capital markets; Bond yields; Yield curve; Treasury bills and bonds
Cover IMF Working Papers
Valuing Interest Payment Guarantees on Developing Country Debt
International Monetary Fund
This paper develops a technique to value guarantees on interest payments on developing-country debt, and provides some preliminary estimates of the cost of such guarantees. The cost of interest payment guarantees is not directly observable because a guarantee is a contingent obligation that becomes effective only if the debtor fails to make a certain payment. The strategy adopted in this paper is to estimate the market price that an interest payment guarantee would have if such a contract existed and were traded in financial markets. Using results from option pricing theory it is possible to calculate the price that an “interest guarantee contract” would carry in financial markets on the basis of the price of developing-country debt in secondary markets.
Keywords:
WP; guarantee; debt; payment; market value; yield; interest payment guarantee; guarantee contract; market price; guarantee G. However; rate of growth; secondary market; Securities markets; Interest payments; Treasury bills and bonds; Asset prices