Abstract

Following turbulence in emerging foreign exchange markets during May and June, pressures on emerging market currencies intensified in July. In Asia, several currencies depreciated sharply, while some of the European emerging market currencies and the South African rand were adversely affected by a variety of country-specific, possibly temporary factors. In the first signs of a potential spillover to Latin America, concerns that the turmoil in foreign exchange markets could lead to widespread foreign investment outflows from emerging markets had a negative impact on equity markets in the region.

Following turbulence in emerging foreign exchange markets during May and June, pressures on emerging market currencies intensified in July. In Asia, several currencies depreciated sharply, while some of the European emerging market currencies and the South African rand were adversely affected by a variety of country-specific, possibly temporary factors. In the first signs of a potential spillover to Latin America, concerns that the turmoil in foreign exchange markets could lead to widespread foreign investment outflows from emerging markets had a negative impact on equity markets in the region.

On July 2, the Bank of Thailand abandoned the baht’s peg to its traditional basket, and the baht immediately depreciated sharply against the U.S. dollar (Figure 17). Pressures then quickly intensified against the Philippine peso and the Malaysian ringgit, each of which received only limited support from its central bank (Figure 18). Bank Indonesia widened the trading band for the rupiah on July 11, which appeared to forestall a substantial buildup in pressures, although the rupiah depreciated to near the bottom of the new band by July 21. In Eastern Europe, the Czech koruna depreciated further during the period and the Polish zloty also fell. Local developments, including floods in the region, played an important role in affecting market sentiment in both cases. The South African rand also came under pressure, though again developments specific to South Africa, including a negative credit risk report and declines in the price of gold, appear to have played the major role. In Latin America, which had been relatively unaffected by the pressures in May and June, concerns about the deterioration in the Brazilian current account balance coincided with downward movements in equity prices, with the Bovespa index falling by 15 percent between July 11 and 18. Concerns then spread to other Latin American equity markets, particularly those with strong trade links to Brazil—Argentina and Mexico—though they soon recovered (Figure 19).

Figure 17.
Figure 17.

Thailand: Selected Financial Indicators, 1997

Sources: Bloomberg Financial Markets L.P; Reuters; and IMF staff estimates.
Figure 18.
Figure 18.

Financial Market Developments in Selected Asian Countries, 1997

(January 2, 1997 = 100)

Source: Bloomberg Financial Markets L.P.
Figure 19.
Figure 19.

Financial Market Developments in Selected Latin American Countries, 1997

Source: Bloomberg Financial Markets L.P.

After the severe pressures in May, when intervention resulted in reserve losses of some $4 billion, followed by a period of relative calm in June, which was nonetheless accompanied by relatively high interest rates, the Thai baht was allowed to float on July 2. In the immediate aftermath of the baht’s announced float, expectations of depreciation led the heavily indebted domestic corporate sector to purchase foreign exchange in the spot market rapidly in an attempt to hedge their foreign exchange exposures. This move helped drive down the baht by 14 percent in onshore, and 19 percent in offshore, trading by the end of the day. Initial reactions to the float were favorable. The stock market index rose by 8 percent on July 3, and foreign investors were reported to be paying substantial premiums on the equity available to foreign residents. However, market sentiment subsequently deteriorated because of concerns about the impact of the devaluation on the financial sector. The baht was highly volatile, and interest rates remained high, suggesting a period of continued uncertainty for the exchange rate.

The Thai financial sector was particularly vulnerable to the interest rate increases traditionally employed in the defense of an exchange rate. After the bout of severe pressures on the baht in early May, the Thai authorities imposed controls on capital transactions in an effort to shield the domestic sector from interest rate increases, while at the same lime making speculation costly to foreign entities.40 Despite the floating of the baht, these controls remained in place. The combination of capital and exchange controls effectively drove a wedge between the onshore and offshore markets that was reflected in large interest rate and exchange rate differentials between the two markets. The segmentation, however, proved imperfect and attempts at circumventing restrictions led to escalating capital controls that became increasingly difficult to enforce. For example, foreign investors desiring baht to close out short positions or to arbitrage differentials between the two markets liquidated their equity positions for baht, putting downward pressure on equity prices. The authorities then moved to require foreign investors to liquidate their equity positions for dollars. They did not, however, impose similar restrictions on the fixed-income market, given the corporate and financial sectors’ needs to roll over domestic debt and maintain access to new Financing. In spite of the segmentation of baht credit markets, onshore interest rates remained high. In addition, attempts to arbitrage the differential between onshore and offshore rates, for example through the purchase of bills of exchange at steep discounts, continued. The convergence of exchange rates and the reduction of interest rate differentials between the two markets suggest that the controls became progressively less effective (Figure 17).

The Philippine peso came under severe pressure in the immediate aftermath of the baht’s depreciation on July 2, These pressures were largely confined to the onshore spot market, given the absence of a liquid forward market in pesos. Attention has focused recently on the extent to which pressures on the peso originated in the offshore nondeliverable forward (NDF) market, and were subsequently transmitted to the spot market as participants attempted to arbitrage the differentials between the two markets. However, average volumes and liquidity in the NDF market are substantially lower than in the spot market. The small size of the NDF market suggests that it would be difficult for participants to build up substantial short positions through the market, and these pressures were largely channeled through the spot market. Nevertheless, on July 22, the central bank prohibited local banks—for a period of three months—from engaging in NDF contracts with offshore banks, reflecting the concern that the NDF market had contributed to speculation in the foreign exchange market.

The Bangko Sentral ng Pilipinas (BSP) responded to these pressures by raising interest rates and intervening in the spot market, and there were reports that local banks were also discouraged from making peso credit available for speculation (Figure 20). Overnight interest rates were raised in steps to 32 percent. It was estimated that between July 2 and July 10 the BSP lost more than $1.5 billion of reserves. It stopped intervening on July 11, allowing the peso to depreciate initially by 11.5 percent. The Bankers Association of the Philippines (BAP) unexpectedly invoked circuit breakers, imposing volatility caps on the Philippine Dealing System that shut down the spot foreign exchange market. On the following trading day the BAP eliminated this cap. Subsequently the peso mid-rate fluctuated in a wide range of some 8 percent. Liquidity in the spot market was extremely low and daily trading volume averaged $75 million between July 14 and 24 compared with an estimated $220 million over the previous six months. The low level of liquidity in the market, combined with uncertainty among market participants about the future value of the peso, resulted in reported bid-ask spreads of 5–10 percent.

Figure 20.
Figure 20.

Yield Curves in Selected Emerging Markets, July 1997

Source: Bloomberg Financial Markets L.P.

Since the Malaysian ringgit was subject to pressures in the immediate aftermath of the baht’s devaluation. Bank Negara Malaysia intervened heavily in support of the ringgit until July 11, when it abruptly withdrew from the foreign exchange market. The cessation of intervention allowed the ringgit to depreciate by 2.4 percent on July 11, before Bank Negara reentered the market and the exchange rate appreciated, thereby imposing a cost on speculators. Markets reacted with nervousness to Bank Negara’s intervention in support of the currency, and there was a perceived increase in the downside risks from shorting the ringgit. During the subsequent week, however, the central bank did not intervene in significant amounts, which gradually reduced perceived downside risks, triggering a sell-off, and the ringgit depreciated by 5 percent between July 11 and 18. Interest rates, which rose when pressures began, fell back substantially, leading to a fairly flat yield curve.

The intervention band for the Indonesian rupiah was widened from 8 to 12 percent on July 11 in a preemptive move designed to deter speculation. In the event, the rupiah depreciated by 8 percent by July 21, and as it fell toward the bottom of the band, some speculative pressures built up to test the floor. In response. Bank Indonesia raised interest rates from 12 percent to 13 percent on July 23, and reportedly intervened heavily in support of the currency.

In what was viewed as a spillover effect from the Asian emerging market currency depreciations, the Brazilian equity market fell by 15 percent during the week of July 11 to 18. This followed a spectacular rise in the market by over 90 percent from the beginning of the year, though, and was viewed by some market participants as representing perhaps a necessary correction. While there was no evidence of short selling of the real, concerns that speculative pressures could lead to a larger-than-expected depreciation, as they had in Asia, contributed to the sell-off in the equity market.

Developments, Prospects, and Key Policy Issues 1997
  • View in gallery

    Thailand: Selected Financial Indicators, 1997

  • View in gallery

    Financial Market Developments in Selected Asian Countries, 1997

    (January 2, 1997 = 100)

  • View in gallery

    Financial Market Developments in Selected Latin American Countries, 1997

  • View in gallery

    Yield Curves in Selected Emerging Markets, July 1997

  • Agénor, Pierre-Richard, 1996, “The Surge in Capital Flows: Analysis of ‘Pull’ and ‘Push’ Factors” (unpublished; International Monetary Fund) (forthcoming in International Journal of Finance and Economics).

    • Search Google Scholar
    • Export Citation
  • Agénor, Pierre-Richard, Jagdeep Bhandari, and Robert P. Flood, 1992, “Speculative Attacks and Models of Balance of Payments Crises,” Staff Papers, Vol. 39 (Washington: International Monetary Fund, June), pp. 35794.

    • Search Google Scholar
    • Export Citation
  • Aoki, Masahiko, ed., 1984, The Economic Analysis of the Japanese Firm (NewYork: North-Holland).

  • Artis, Michael J., and Mark P. Taylor, 1990, “Abolishing Exchange Control: The U.K. Experience,” in Private Behaviour and Government Policy in Interdependent Economies, ed. by Anthony S. Courakis and Mark P. Taylor (Oxford: Clarendon Press).

    • Search Google Scholar
    • Export Citation
  • Artis, Michael J., and Mark P. Taylor, 1994, “The Stabilizing Effect of ERM on Exchange Rates and Interest Rates: Some Nonparametric Tests,” Staff Papers, International Monetary Fund, Vol. 41 (March), pp. 12348.

    • Search Google Scholar
    • Export Citation
  • Bank for International Settlements, 1996a, Annual Report (Basle).

  • Bank for International Settlements, 1996b, 1997, International Banking and Financial Market Developments (Basle).

  • Bank for International Settlements, 1996c, “Financial Market Volatility: Measurement, Causes, and Consequences,” Conference Paper No. 1. (Basle).

    • Search Google Scholar
    • Export Citation
  • Bank for International Settlements, 1996d, Settlement Risk in Foreign Exchange Transactions, Committee on Payment and Settlement Systems No. 17 (Basle).

    • Search Google Scholar
    • Export Citation
  • Bank of England, 1996, Practical Issues Arising from the Introduction of the Euro, Issues 1–3 (London, April).

  • Barth, James R., Daniel E. Nolle, and Tara N. Rice, 1997, “Commercial Banking Structure, Regulation, and Performance: An International Comparison,” Economics Working Paper 97–6, Office of the Comptroller of the Currency (Washington).

    • Search Google Scholar
    • Export Citation
  • Bartolini, Leonardo, and Allan Drazen, 1997, “When Liberal Policies Reflect External Shocks, What Do We Learn?” Journal of International Economics, Vol. 42 (May), pp. 24973.

    • Search Google Scholar
    • Export Citation
  • Basle Committee on Banking Supervision, 1997, Core Principles for Effective Banking Supervision (Basle: Bank for International Settlements, April).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, 1989, “Saving-Investment Correlations: Immobile Capital, Government Policy, or Endogenous Behavior?” IMF Working Paper 89/66 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, Morris Goldstein, and Geoffrey Woglom, 1995, “Do Credit Markets Discipline Sovereign Borrowers? Evidence from U.S. States,” Journal of Money, Credit, and Banking, Vol. 27, Pt. I (November), pp. 104659.

    • Search Google Scholar
    • Export Citation
  • Berger, Allen N., and David B. Humphrey, 1997, “Efficiency of Financial Institutions: International Survey and Directions for Future Research,” Finance and Economics Discussion Series No. 1997–11 (Washington: Board of Governors of the Federal Reserve System).

    • Search Google Scholar
    • Export Citation
  • Bergsten, C. Fred, 1997, “The Impact of the Euro on Exchange Rates and International Policy Cooperation,” in EMU and the International Monetary System, ed. by P. Masson, T. Krueger, and B. Turtleboom (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Bianco, Magda, Andrea Gerali, and Riccardo Massaro, 1996, “Financial Systems Across ‘Developed Economies’: Convergence or Path Dependence?” (unpublished; Rome: Bank of Italy).

    • Search Google Scholar
    • Export Citation
  • Bishop, Graham, 1997, “The European Central Bank and the Prudential Regulation of the Financial System,” paper presented at a conference on the “Monetary, Fiscal and Financial Implications of European Monetary Union,” European University Institute, Florence, June 1997.

    • Search Google Scholar
    • Export Citation
  • Black, Fischer, and Myron J. Scholes, 1973, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, Vol. 81 (May/June), pp. 63754.

    • Search Google Scholar
    • Export Citation
  • Blanco, Herminio, and Peter M. Garber, 1986, “Recurrent Devaluation and Speculative Attacks on the Mexican Peso,” Journal of Political Economy, Vol. 94 (February), pp. 14866.

    • Search Google Scholar
    • Export Citation
  • Bloomberg Business News, 1997, “U.S. Economy: Greenspan Says U.S. Stocks ‘Not Unreasonable,’” March 5.

  • Bloomfield, Arthur I., 1963, “Short-Term Capital Movements Under the Pre-1914 Gold Standard,” Princeton Studies in International Finance, No. 11 (Princeton, New Jersey).

    • Search Google Scholar
    • Export Citation
  • Bloomfield, Arthur I., 1968, “Patterns of Fluctuation in International Investment Before 1914,” Princeton Studies in International Finance, No. 21 (Princeton, New Jersey).

    • Search Google Scholar
    • Export Citation
  • Board of Governors of the Federal Reserve System, 1984, “The Federal Reserve Position on Restructuring of Financial Regulation Responsibilities,” Federal Reserve Bulletin (Washington, July), pp. 54857.

    • Search Google Scholar
    • Export Citation
  • Board of Governors of the Federal Reserve System, 1997, “Family Finances in the United States: Recent Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin (Washington, January).

    • Search Google Scholar
    • Export Citation
  • Bodart, Vincent, and Paul Reding, 1996, “Exchange Rate Regime, Volatility, and International Correlations on Bond and Stock Markets” (unpublished; Namur, Belgium: Department of Economics, University of Namur).

    • Search Google Scholar
    • Export Citation
  • Bolton, Patrick, and Ernst-Ludwig von Thadden, 1996, “Blocks, Liquidity, and Corporate Control,” London School of Economics Financial Markets Group Discussion Paper No. 249 (October).

    • Search Google Scholar
    • Export Citation
  • Bordo, Michael, and Anna J. Schwartz, 1996, “Why Clashes Between Internal and External Stability Goals End in Currency Crises, 1797–1994,” NBER Working Paper No. 5710 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Borio, Claudio, 1997, “Monetary Policy Operating Procedures in Industrial Countries,” BIS Conference Paper No. 3 (Basle: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Bridgewater Associates, 1997a, “Turning Apples into Oranges—Unlocking the Mystery of Market Segmentation of Bradys and Euros,” Bridgewater Daily Observations, January 20.

    • Search Google Scholar
    • Export Citation
  • Bridgewater Associates 1997b, “Earnings Expectations for U.S. Equities,” Bridgewater Daily Observations, March 11.

  • Bridgewater Associates, 1997c, “Equity Mutual Fund Activity,” Bridgewater Daily Observations, April 16.

  • BZW Securities Limited, 1997, Global Markets Digest Q1 1997 (London, January).

  • Cairncross, Alec K., 1953, Home and Foreign Investment 1870–1913: Studies in Capital Accumulation (London: Cambridge University Press).

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., 1995, “Varieties of Capital-Market Crises,” IMF Seminar Series, No. 1995–03 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., Leonardo Leiderman, and Carmen M. Reinhart, 1993, “Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors,” Staff Papers, International Monetary Fund, Vol. 40 (March), pp. 10851.

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., 1996, “Inflows of Capital to Developing Countries in the 1990s,” Journal of Economic Perspectives, Vol. 10 (Spring), pp. 12339.

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., and Morris Goldstein, 1996, “What Role for the Official Sector?” in Private Capital Flows to Emerging Markets After the Mexican Crisis, ed. by G.A. Calvo, M. Goldstein, and E. Hochreiter (Washington: Institute of International Economics).

    • Search Google Scholar
    • Export Citation
  • Caprio, Gerard, and Daniela Klingebiel, 1997, “Bank Insolvency: Bad Luck, Bad Policy, or Bad Banking?” in Annual World Bank Conference on Development Economics 1996, ed. by M. Bruno and B. Pleskovic (Washington), pp. 79104.

    • Search Google Scholar
    • Export Citation
  • Cardoso, Eliana, and Rudiger Dornbusch, 1989, “Foreign Private Capital Flows,” in Handbook of Development Economics, Vol. 2, ed. by Hollis Chenery and T.N. Srinivasan (Amsterdam; New York: North Holland).

    • Search Google Scholar
    • Export Citation
  • Cassard, Marcel, and David Folkerts-Landau, forthcoming, “Risk Management of Sovereign Assets and Liabilities,” IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Christoffersen, Peter, Guay Lim, and Garry Schinasi, 1997, “Using Asset Prices to Assess Inflationary Pressures: Constructing a Broad-Based Price Measure for Japan, 1970–96” (unpublished; Washington: Research Department, International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Claessens, Stijn, Michael P. Dooley, and Andrew Warner, 1995, “Portfolio Capital Flows: Hot or Cold?” World Bank Economic Review, Vol. 9 (January), pp. 15374.

    • Search Google Scholar
    • Export Citation
  • Cole, Harold L., and Timothy J. Kehoe, 1996, “A Self-Fulfilling Model of Mexico’s 1994–95 Debt Crisis,” Journal of International Economics, Vol. 41 (November), pp. 30930.

    • Search Google Scholar
    • Export Citation
  • Commission of the European Communities, 1988a, “The Economics of 1992,” European Economy, Vol. 35 (March), pp. 8695, 17197.

  • Commission of the European Communities, 1988b, “Annual Economic Report 1988–1989,” European Economy, Vol. 38 (November), pp. 79, 13741.

    • Search Google Scholar
    • Export Citation
  • Cumby, Robert E., and Sweder van Wijnbergen, 1989, “Financial Policy and Speculative Runs with a Crawling Peg: Argentina 1979–81,” Journal of International Economics, Vol. 27 (August), pp. 11127.

    • Search Google Scholar
    • Export Citation
  • Deutsche Bank Research, 1996, “EMU and Financial Markets—Some Issues and Prospects,” EMU Watch, No. 22, December 9.

  • Deutsche Bundesbank, Kapital Markt Statistik (Frankfurt, various issues).

  • Diamond, Douglas W., 1984, “Financial Intermediation and Delegated Monitoring,” Review of Economic Studies, Vol. 51 (July), pp. 393414.

    • Search Google Scholar
    • Export Citation
  • Dooley, Michael P., 1986, “Country-Specific Risk Premiums, Capital Flight and Net Investment Income Payments in Selected Developing Countries,” DM/86/17 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dooley, Michael P., 1997, “Profitable Speculation and Monetary Unions,” paper presented at a conference on the “Monetary, Fiscal, and Financial Implications of European Monetary Union,” European University Institute, Florence, June.

    • Search Google Scholar
    • Export Citation
  • Dooley, Michael P., forthcoming, “Governments’ Debt and Asset Management and Financial Crises: Sellers Beware,” in Risk Management for Sovereign Countries (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Dooley, Michael P., Donald J. Mathieson, and Liliana Rojas-Suárez, 1996, “Capital Mobility and Exchange Market Intervention in Developing Countries,” WP/96/131 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Drudi, Francesco, and Alessandro Prati, 1997, “Differences and Analogies Between Index-Linked and Foreign-Currency Bonds: A Theoretical and Empirical Analysis,” in Managing Public Debt: Index-Linked Bonds in Theory and Practice, ed. by Marcello De Cecco, Lorenzo Pecchi, and Gustavo Piga (Cheltenham, United Kingdom; Brookfield, Vermont: Edward Elgar), pp. 195216.

    • Search Google Scholar
    • Export Citation
  • Dunning, John H., 1970, Studies in International Investment (London: Allen & Unwin).

  • Eaker, Mark, Dwight Grant, and Nelson Woodard, 1993, “A Multinational Examination of International Equity and Bond Investment with Currency Hedging,” Journal of Futures Markets, Vol. 13, (May), pp. 31324.

    • Search Google Scholar
    • Export Citation
  • Edelstein, Michael, 1982, Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850–1914 (New York: Columbia University Press).

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Andrew Rose, and Charles Wyplosz, 1995, “Exchange Market Mayhem: The Antecedents and Aftermath of Speculative Attacks” Economic Policy, Vol. 21 (October), pp. 249312.

    • Search Google Scholar
    • Export Citation
  • Eijffinger, Sylvester, C.W. Lemmen, and Jan J.G. Lemmen, 1995, “Money Market Integration in Europe,” Swiss Journal of Economics and Statistics, Vol. 131 (March), pp. 337.

    • Search Google Scholar
    • Export Citation
  • Elstein, Aaron, 1997, “1996 Activity Slowed Down, But Deals Should Heat Up,” American Banker, January 31, pp. 2A9A.

  • Emerging Markets Traders Association, 1997, Debt Trading Volume Survey 1996 (March 17).

  • Emmons, William, 1997, “A Tale of Two Cycles,” Monetar Trends, Federal Reserve Bank of St. Louis (April).

  • ERE (Economic Research Europe), forthcoming, “A Study on the Effectiveness and Impact of Internal Market Integration on the Banking and Credit Sector” (unpublished; Economic Research Europe and Public and Corporate Economic Consultants (PACEC) Ltd., Cambridge, England).

    • Search Google Scholar
    • Export Citation
  • Euromoney, 1997, “Exotics Enter the Mainstream” (March), pp. 12730.

  • European Commission, 1995, Green Paper on the Practical Arrangements for the Introduction of the Single Currency (Luxembourg: Office for Official Publications of the European Community).

    • Search Google Scholar
    • Export Citation
  • European Monetary Institute, 1996, “First Progress Report on the TARGET Project” (Frankfurt, August).

  • European Monetary Institute, 1997, The Single Monetary Policy in Stage Three: Specification of the Operational Framework (Frankfurt, January).

    • Search Google Scholar
    • Export Citation
  • Feldstein, Martin, and Charles Horioka, 1980, “Domestic Saving and International Capital Flows,” Economic Journal, Vol. 90 (June), pp. 31429.

    • Search Google Scholar
    • Export Citation
  • Fernandez-Arias, Eduardo, 1996, “The New Wave of Private Capital Flows: Push or Pull?” Journal of Development Economics, Vol. 48 (March), pp. 38418.

    • Search Google Scholar
    • Export Citation
  • Fishlow, Albert, 1985, “Lessons from the Past: Capital Markets During the Nineteenth Century and the Interwar Period,” International Organization, Vol. 39, pp. 383139.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P., and Peter M. Garber, 1984a, “Gold Monetization and Gold Discipline,” Journal of Political Economy, Vol. 92 (February), pp. 90107.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P., and Peter M. Garber, 1984b, “Collapsing Exchange Rate Regimes: Some Linear Examples,” Journal of International Economics, Vol. 17 (August), pp. 113.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P., and Peter M. Garber, and Charles Kramer, 1996, “Collapsing Exchange Rate Regimes: Another Linear Example,” Journal of International Economics, Vol. 41 (November), pp. 22334.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P., and Nancy P. Marion, 1996, “Speculative Attacks: Fundamentals and Self-Fulfilling Prophecies,” NBER Working Paper 5789 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P., and Andrew K. Rose, 1995, “Fixing Exchange Rates: A Virtual Quest for Fundamentals,” Journal of Monetary Economics, Vol. 36 (August), pp. 337.

    • Search Google Scholar
    • Export Citation
  • Folkerts-Landau, David, and Peter Garber, 1992, “The European Central Bank: A Bank or a Monetary Policy Rule,” NBER Working Paper No. 4016 (Cambridge, Massachusetts: National Bureau of Economic Research), pp. 133.

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey A., 1996, “Exchange Rates and the Single Currency,” in The European Equity Markets: The State of the Union and an Agenda for the Millennium, ed. by Benn Steil (Copenhagen: European Capital Markets Institute).

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey A., and Andrew K. Rose, 1996, “Currency Crashes in Emerging Markets: An Empirical Treatment,” Journal of International Economics, Vol. 41 (November), pp. 35168.

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey A., Steven Phillips, and Menzie Chinn, 1993, “Financial and Currency Integration in the European Monetary System: The Statistical Record,” in Adjustment and Growth in the European Monetary Union, ed. by Francisco Torres and Francesco Giavazzi (New York: Cambridge University Press).

    • Search Google Scholar
    • Export Citation
  • Fratianni, Michele, and Juergen von Hagen, 1990, “The European Monetary System Ten Years After,” Carnegie Rochester Conference Series on Public Policy, Vol. 32, pp. 173242.

    • Search Google Scholar
    • Export Citation
  • Garber, Peter M., 1996, “Managing Risks to Financial Markets from Volatile Capital Flows: The Role of Prudential Regulation,” International Journal of Finance and Economics, Vol. 1 (July), pp. 18395.

    • Search Google Scholar
    • Export Citation
  • Garber, Peter M., 1997, “Notes on the Role of TARGET in a Stage III Crisis” (unpublished; Brown University).

  • Giddy, Ian, Anthony Saunders, and Ingo Walter, 1996, “Clearance and Settlement,” in The European Equity Markets: The State of the Union and an Agenda for the Millennium, ed. by Benn Steil (Copenhagen: European Capital Markets Institute), pp. 32154.

    • Search Google Scholar
    • Export Citation
  • Glen, Jack D., and Philippe Jorion, 1993, “Currency Hedging for International Portfolios,” Journal of Finance, Vol. 48 (December), pp. 186586.

    • Search Google Scholar
    • Export Citation
  • Goldberg, Linda S., 1994, “Predicting Exchange Rate Crises: Mexico Revisited,” Journal of International Economics, Vol. 36 (May), pp. 41330.

    • Search Google Scholar
    • Export Citation
  • Goldfajn, Ilan, and Rodrigo O. Valdes, 1997, “Capital Flows and the Twin Crises: The Role of Liquidity,” IMF Working Paper 97/87 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Goldman Sachs International, 1997a, “Are BTPs Too Expensive?” Italian Economics Analyst, Issue No. 97/01 (February).

  • Goldman Sachs International, 1997b, “The Equity Risk Premium and the Brave New Business Cycle,” U.S. Economics Analyst, Issue No. 97/08 (February).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, 1997, “The Case for an International Banking Standard,” Policy Analyses in International Economics No. 47 (Washington: Institute for International Economics).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and Michael Mussa, 1993, “The Integration of World Capital Markets,” IMF Working Paper 93/95 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and Philip Turner, 1996, “Banking Crises in Emerging Economies: Origins and Policy Options,” BIS Economic Paper No. 46 (Basle: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Goodhart, Charles, and Dirk Schoenmaker, 1995, “Monetary Policy and Banking Supervision,” Oxford Economic Papers, Vol. 47 (October), pp. 53960.

    • Search Google Scholar
    • Export Citation
  • Greenspan, Alan, 1997, remarks at the Conference on Bank Structure and Competition at the Federal Reserve Bank of Chicago, January 5, 1997, BIS Review, No. 50 (May 29), pp. 17.

    • Search Google Scholar
    • Export Citation
  • Group of Ten, 1997, Financial Stability in Emerging Market Economies (Basle: Bank for International Settlements, April).

  • Gurley, John G., and Edward S. Shaw, 1960, Money in a Theory of Finance (Washington: Brookings Institution).

  • Haque, Nadeem U., and Peter J. Montiel, 1991, “Capital Mobility in Developing Countries: Some Empirical Tests,” World Development, Vol. 19 (October), pp. 139198.

    • Search Google Scholar
    • Export Citation
  • Honohan, Patrick, 1997, “Banking System Failures in Developing and Transition Countries: Diagnosis and Prediction,” BIS Working Paper No. 39 (Basle: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Howell, Michael J., 1993, “Institutional Investors and Emerging Stock Markets,” in Portfolio Investment in Developing Countries, ed. by Stijn Claessens and Sudarshan Gooptu, World Bank Discussion Paper No. 228 (Washington: World Bank), pp. 7887.

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1994, 1995, 1996, International Capital Markets: Developments, Prospects, and Policy Issues, World Economic and Financial Surveys (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1997, World Economic Outlook, May 1997: A Survey by the Staff of the International Monetary Fund, World Economic and Financial Surveys (Washington).

    • Search Google Scholar
    • Export Citation
  • Ireland, National Treasury Management Agency, 1996, Report and Accounts for the Year Ended December 31, 1995.

  • James, Harold, 1996, International Monetary Cooperation Since Bretton Woods (Washington: International Monetary Fund; New York: Oxford University Press).

    • Search Google Scholar
    • Export Citation
  • Jeanneau, S., 1996, “The Market for International Asset-Backed Securities,” International Banking and Financial Market Developments (Basle: Bank for International Settlements, November), pp. 3646.

    • Search Google Scholar
    • Export Citation
  • Jones Lang Wootton, 1997, Quarterly Investment Report: The European Property Market (London).

  • J.P. Morgan, 1996, “The Euro, FX Reserves and Vehicle Currencies: Some Unusual Findings,” Morgan Guaranty Trust Company, Foreign Exchange Research (September 13).

    • Search Google Scholar
    • Export Citation
  • J.P. Morgan,, 1997a, “European Economic Outlook” (January/February).

  • J.P. Morgan, 1997b, “Bearish on the Nikkei” (February 28).

  • J.P. Morgan, 1997c, “What Happens If EMU Is Delayed?” (March 21).

  • Kaminsky, Graciela L., and Carmen M. Reinhart, 1996, “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems,” IMF Seminar Series, No. 1996–12, pp. 126.

    • Search Google Scholar
    • Export Citation
  • Kaminsky, Graciela L., Saul Lizondo, and Carmen M. Reinhart, 1997, “Leading Indicators of Currency Crises,” IMF Working Paper 97/79 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Kenen, Peter B., 1997, “Monetary Policy in Stage Three: A Review of the Framework Proposed by the European Monetary Institute,” paper presented at a conference on the “Monetary, Fiscal, and Financial Implications of European Monetary Union,” European University Institute, Florence, June.

    • Search Google Scholar
    • Export Citation
  • Kindleberger, Charles P., 1965, Balance of Payments Deficits and the International Market for Liquidity, Princeton Essays in International Finance No. 46 (Princeton, New Jersey).

    • Search Google Scholar
    • Export Citation
  • Kindleberger, Charles P., 1982, “The Cyclical Pattern of Long-Term Lending,” in The Theory and Experience of Economic Development: Essays in Honour of Sir W. Arthur Lewis, ed. by Mark Gersovitz and others (London: Allen & Unwin).

    • Search Google Scholar
    • Export Citation
  • Kneeshaw, J.T., 1995, “A Survey of Non-financial Sector Balance Sheets in Industrialized Countries: Implications for the Monetary Policy Transmission Mechanism,” BIS Working Paper No. 25 (Basle: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Kritzman, Mark, 1993, “Optimal Currency Hedging Policy with Biased Forward Rates,” Journal of Portfolio Management, Vol. 19, No. 4, pp. 94100.

    • Search Google Scholar
    • Export Citation
  • Krugman, Paul, 1979, “A Model of Balance-of-Payments Crises,” Journal of Money, Credit, and Banking, Vol. 11 (August), pp. 31125.

    • Search Google Scholar
    • Export Citation
  • Lall, Subir, 1997, “Speculative Attacks, Forward Market Intervention, and the Classic Bear Squeeze” (unpublished; Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Lauterbach, Beni, and Uri Ben-Tsiyon, 1993, “Stock Market Crashes and the Performance of Circuit Breakers: Empirical Evidence,” Journal of Finance, Vol. 48 (December), pp. 190925.

    • Search Google Scholar
    • Export Citation
  • Lee, Charles, Mark Ready, and Paul Seguin, 1994, “Volume, Volatility, and the New York Stock Exchange Trading Halts,” Journal of Finance, Vol. 49 (March), pp. 183214.

    • Search Google Scholar
    • Export Citation
  • Lindgren, Carl-Johan, Gillian Garcia, and Matthew I. Saal, 1996, Bank Soundness and Macroeconomic Policy (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., and Bart G. Turtelboom, 1997, “Characteristics of the Euro, the Demand for Reserves, and Policy Coordination Under EMU,” in EMU and the International Monetary System, ed. by Paul R. Masson, Thomas H. Krueger, and Bart G. Turtelboom (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., Thomas H. Krueger, and Bart G. Turtelboom, eds., 1997, EMU and the International Monetary System (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Mathieson, Donald J., and Liliana Rojas-Suarez, 1993, Liberalization of the Capital Account: Experiences and Issues, IMF Occasional Paper No. 103 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Melick, William R., and Charles P. Thomas, 1997, “Recovering an Asset’s Implied PDF from Option Prices: An Application to Crude Oil During the Gulf Crisis,” Journal of Financial and Quantitative Analysis, Vol. 32, No. 1, pp. 91115.

    • Search Google Scholar
    • Export Citation
  • Miller, Victoria, 1996, “Speculative Currency Attacks with Endogenously Induced Commercial Bank Crises,” Journal of International Money and Finance, Vol. 15 (June), pp. 383403.

    • Search Google Scholar
    • Export Citation
  • Mishkin, Frederic S., 1996, “Asymmetric Information and Financial Crises: A Developing Country Perspective,” IMF Seminar Series, No. 1996–11.

    • Search Google Scholar
    • Export Citation
  • “Mixed Reactions to US Regulatory Changes,” 1997, International Financing Review, Issue No. 1169, February 8, p. 99.

  • Mussa, Michael, 1988, Commentary on Charles Goodhart, “The International Transmission of Asset Price Volatility,” in Financial Market Volatility, Federal Reserve Bank of Kansas City Symposium Series, pp. 12732.

    • Search Google Scholar
    • Export Citation
  • Obstfeld, Maurice, 1994, “The Logic of Currency Crises,” NBER Working Paper No. 4640 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Obstfeld, Maurice, 1997, “Destabilizing Effects of Exchange-Rate Escape Clauses,” Journal of International Economics, Vol. 43 (August), pp. 6178.

    • Search Google Scholar
    • Export Citation
  • Obstfeld, Maurice, and Alan M. Taylor, 1997, “The Great Depression as a Watershed: International Capital Mobility over the Long Run,” NBER Working Paper No. 5960 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • O’Keefe, John P., 1996, “Banking Industry Consolidation: Financial Attributes of Merging Banks,” FDIC Banking Review, Vol. 9 (December).

    • Search Google Scholar
    • Export Citation
  • Organization for Economic Cooperation and Development, OECD Financial Statistics, Part III, Non-financial Enterprises Financial Statements, various issues (Paris: OECD).

    • Search Google Scholar
    • Export Citation
  • Organization for Economic Cooperation and Development, 1996, Bank Profitability: Financial Statements of Banks, 1985–1995 (Paris).

  • Pagano, Marco, 1996, “The Cost of Trading in European Equity Markets,” London School of Economics Financial Markets Group Special Paper Series No. 83, pp. 122.

    • Search Google Scholar
    • Export Citation
  • Paribas Capital Markets, 1996, “EMU Countdown,” International Research (London: Banque Paribas), September 9.

  • Paribas Capital Markets, 1997, “EMU Countdown,” International Research (London), various issues.

  • Perold, Andre F., and Evan C. Schulman, 1988, “The Free Lunch in Currency Hedging: Implications for Investment Policy and Performance Standards,” Financial Analysts Journal, Vol. 44 (May-June), pp. 4550.

    • Search Google Scholar
    • Export Citation
  • Prati, Alessandro, and Garry Schinasi, 1997, “European Monetary Union and International Capital Markets: Structural Implications and Risks,” IMF Working Paper 97/62 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Reisen, Helmut, and Helene Yeches, 1993, “Time-Varying Estimates on the Openness of the Capital Account in Korea and Taiwan,” Journal of Development Economics, Vol. 41 (August), pp. 285305.

    • Search Google Scholar
    • Export Citation
  • Rich, Georg, 1989, “Canadian Banks, Gold, and the Crisis of 1907,” Explorations in Economic History, Vol. 26 (April), pp. 13560.

  • Rojas-Suarez, Liliana, 1991, “Risk and Capital Flight in Developing Countries,” in Determinants and Systemic Consequences of International Capital Flows, by Morris Goldstein and others, Occasional Paper No. 77 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sachs, Jeffrey D., Aaron Tornell, and Andres Velasco, 1996, “Financial Crises in Emerging Markets: The Lessons from 1995,” Brookings Papers on Economic Activity: 1, Brookings Institution, pp. 147215.

    • Search Google Scholar
    • Export Citation
  • Salant, Stephen W., and Dale W. Henderson, 1978, “Market Anticipations of Government Policies and the Price of Gold,” Journal of Political Economy, Vol. 86 (August), pp. 62748.

    • Search Google Scholar
    • Export Citation
  • Salomon Brothers, 1996, “Managing Convergence,” Prospects for Financial Markets (December).

  • Salomon Brothers, 1997a, Chilean Bank Reference Guide: December 1996 (New York, March).

  • Salomon Brothers, 1997b, Argentine Bank Reference Guide: December 1996 (New York, April).

  • SBC Warburg, 1996, EMU: Opportunity or Threat? (December).

  • Smith, R. Todd, 1995, “Markets for Corporate Debt Securities,” IMF Working Paper 95/67 (Washington: International Monetary Fund).

  • Söderlind, Paul, and Lars E.O. Svensson, 1997, “New Techniques to Extract Market Expectations from Financial Instruments,” NBER Working Paper No. 5877 (Cambridge, Massachusetts: National Bureauu of Economic Research) (forthcoming in Journal of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Standard & Poor’s, 1996, “Brady Bonds Still Top Asset Class in Emerging Markets,” Credit Week (May 9).

  • Steinherr, Alfred, 1996, “Universal vs. Specialized Banks,” Economic Studies Working Paper No. 20 (Washington: American Institute for Contemporary German Studies, The Johns Hopkins University, December).

    • Search Google Scholar
    • Export Citation
  • Sundararajan, Vasudevan, and Tomas J.T. Balino, eds., 1991, Banking Crises: Cases and Issues (Washington: International Monetary Fund).

  • Sweden, National Debt Office, 1996, Annual Report for Fiscal Year 1994/95.

  • Taylor, Alan M., 1996, “International Capital Mobility in History: The Saving-Investment Relationship,” NBER Working Paper No. 5943 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Thomas, Brinley, 1967, “The Historical Record of International Capital Movements to 1913,” in Capital Movements and Economic Development, ed. by John A. Adler (New York: St. Martin’s Press).

    • Search Google Scholar
    • Export Citation
  • Triffin, Robert, 1966, The Balance of Payments and the Foreign Investment Position of the United States, Princeton Essays in International Finance No. 55 (Princeton, New Jersey).

    • Search Google Scholar
    • Export Citation
  • United Nations, 1949, International Capital Movements During the Interwar Period (New York: United Nations).

  • United States, Department of Commerce, Survey of Current Business, various issues.

  • United States, Department of the Treasury, Treasury Bulletin, various issues.

  • United States, Office of the Comptroller of the Currency, 1996, Quarterly Derivatives Fact Sheet, 4th quarter.