MODIS: A Market-Oriented Deposit Insurance Scheme

This paper argues that an optimal deposit insurance scheme would allow the level of insurance coverage to be determined by the market. Based on this principle, the paper proposes an insurance scheme that minimizes distortions and embodies fairness and credibility, two essential characteristics of a viable and effective deposit insurance scheme. Using a simple model for the determination of the optimal level of insurance coverage, it is shown that the optimal coverage is higher for developing compared to developed countries; a condition that is broadly satisfied by prevailing deposit insurance practices around the world.Deposit Insurance; Market-Oriented Approach

Leaning Against the Wind: Macroprudential Policy

Abstract In recent years, macroprudential policy has become an increasingly active policy area. Many countries have adopted it as a tool to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. This paper reviews the use of key macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions since 2000, and constructs various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are then assessed through an event study, cross-country macro panel regressions and bank-level micro panel regressions. The analysis suggests that macroprudential policy and capital flow measures have helped curb housing price growth, equity flows, credit growth, and bank leverage. The instruments that have been particularly effective in this regard include loan-to-value ratio caps, housing tax measures, and foreign currency-related measures. JEL Classification Numbers: G28, E5

Il ripristino della disciplina nella finanza pubblica: analisi e proposte

Dottorato di ricerca in economia politica. 10. Ciclo. Relatori Franco Spinelli e Guido Tabellini.Consiglio Nazionale delle Ricerche - Biblioteca Centrale - P.le Aldo Moro, 7, Rome; Biblioteca Nazionale Centrale - P.za Cavalleggeri, 1, Florence / CNR - Consiglio Nazionale delle RichercheSIGLEITItal

Financial Development in Emerging Europe

This paper assesses the status of financial development in Emerging Europe, analyzes the factors that have shaped it, and discusses policy priorities. Financial development has progressed to varying degrees across the region. Macroeconomic stability and institutional quality have been important factors. Going forward, the EU integration process is likely to propel further reforms and shape financial development in EU members. In non-EU emerging economies the focus should be on maintaining macroeconomic stability and strengthening law enforceability. Creating a well-functioning government securities market, reinforcing corporate governance and creditor rights protection, and promoting the emergence of institutional investors would be beneficial.Emerging markets;Governance;government securities, securities market, capital account liberalization, securities markets, financial sector, interest rate liberalization, financial market, bonds, government bonds, financial markets, stock exchange, capital market, debt securities, equity market, international financial statistics, international country risk guide, financial institutions, financial services, financial market development, corporate securities, bond, financial sector development, capital markets, capital market development, corporate bonds, financial assets, joint stock, financial instruments, equity markets, financial system, international standards, financial liberalization, corporate bond, financial globalization, financial intermediation, international interest rates, capital income, financial repression, deposit money, joint stock company, government bond markets, investor confidence, stock company, financial economics, current account balance, stock exchanges, capital flows, financial systems, commercial codes, stock market, equity securities, financial stability, bond issues, capital formation, capital account opening, stock markets, developing government bond markets, denominated bonds, securities law, domestic financial liberalization, current account deficits, capital controls, eurobond, deposit rates, external capital flows, credit expansion, government bond, stock market development, corporate valuation, money market, financial reforms, securities market regulation, outstanding corporate bond, financial sector performance, external capital, stock of debt, securities pricing, marketable securities, domestic interest rates, domestic financial sector, developing government bond, corporate bond issues, bond markets, domestic financial markets

Credit Rationing in Emerging Economies' Access to Global Capital Markets

This paper tests empirically the theoretical prediction that the country premium paid by emerging economies on sovereign debt increases with the amount of debt up to a certain critical level, above which the supply of foreign funds becomes fixed. The results confirm this theoretical prediction. The approach developed in the paper is also used to test for the presence of moral hazard in international lending. The results indicate significant changes in the supply of funds curve consistent with the presence of moral hazard in the period immediately following the Mexican rescue operation, but not after the Russian non-bailout.Sovereign debt;Moral hazard;Credit ceilings;Public debt;External debt;External borrowing;Risk premium;Interest costs;Supply elasticity;Emerging markets;Economic models;Access to capital markets;statistic, statistics, financial statistics, international financial statistics, bond, correlation, international reserves, international finance, equation, probability, equations, standard errors, international country risk guide, bonds, prediction, functional form, international interest rates, bond spreads, standard deviation, market bond, descriptive statistics, emerging market bond, predictions, dummy variable, emerging market bonds, financial markets, sovereign bond, linear models, eurobond, international capital markets, international capital, eurobonds, basic descriptive statistics, quadratic equation, explanatory power, significance level, international financial markets, instrumental variable, financial stability, instrumental variables, financial sector, statistical significance, time series, municipal bond market, derivative, bond index, nonlinear model, bond spread, significance levels, municipal bond, international bond

Commodity Price Volatility, Cyclical Fluctuations, and Convergence

This paper assesses the role of international commodity prices, cyclical fluctuations, and convergence in driving inflation in 18 European emerging economies. Country specific VARs and panel estimates indicate that international commodity price shocks have a significant impact on domestic inflation, but the inflation response is asymmetric for positive and negative shocks. Cyclical fluctuations explain a relative small share of inflation variability, and the inflation response is asymmetric during upturns and downturns. Price convergence is estimated to add nearly 3 percentage points to headline inflation, for the average country whose price level is about 50 percent relative to the EU-15 average.Commodity prices;Emerging markets;Economic models;inflation, price inflation, price level, inflation response, monetary fund, relative prices, relative price, inflation rates, money market, inflation equation, inflationary pressure, monetary economics, national bank, inflationary impact, inflation dynamics, average price level, effective exchange rates, real value, increase in inflation, high inflation, maximum inflation

Cost and Effectiveness of Banking Sector Restructuring in Transition Economies

The paper analyses the cost and effectiveness of bank restructuring policies in 11 transition countries during 1991-98. It argues that country-specific banking sector features, the size of bad loans inherited from the centrally planned system, and weaknesses in the restructuring policies implemented were the main factors affecting the overall fiscal costs, with the latter two being more significant. The paper finds no significant relationship between the size of restructuring costs and overall improvement in banking sector performance for the sample countries as a whole.Bank restructuring;banking, banking sector, banking sector problems, bonds, banking system, present value, recapitalization, banking crises, national bank, bank credit, bank liabilities, bank portfolios, consolidation bonds, moral hazard, bank liquidity, liquidity support, banking system assets, bank problems, banking supervision, banking crisis, bank policy, private bank, government bonds, bank assistance, deposit insurance, insider lending, bond, international financial statistics, bank liquidations, monetary authority, bank recapitalization, financial system, financial intermediation, banks ? assets, bank assets, bond issues, foreign exchange, banking assets, cash deposit, bank governance, interest rates on bonds, currency crisis, loan classification, cash flow, banking loans, stabilization programs, banking institutions, bank restructuring strategies, zero coupon bonds, bank debt, retail bank, bank deposits, coupon bonds, systemic banking crises, bank runs, bank shares, financial institutions, bank insolvencies, deposit rates, bank licenses, deposit rate, banking law, compensation bonds, financial sector, bank reform, bank intervention, government bond, banks solvency, systemic property transfer, bank profitability, bond transfer

How does fiscal policy affect monetary policy in emerging market countries?

This paper analyses how fiscal policy affects monetary policy in emerging economies. First, it conducts a test for fiscal dominance, and finds that the evidence points clearly to a regime of fiscal dominance in the case of Argentina and Brazil during the 1990s and early 2000s, while for the other countries in the sample the results are mixed. Next, the paper evaluates whether monetary policy accommodates fiscal policy, by assessing whether fiscal variables enter significantly in the central bank's reaction function. The findings indicate that in the emerging markets under consideration the conduct of monetary policy is not directly affected by changes in real primary balances. Then, the paper explores another mechanism through which fiscal policy could affect monetary policy in an emerging economy, by looking at the impact of fiscal policy on country premium and exchange rates. The empirical analysis is conducted through an event study, assessing the impact of news concerning fiscal variables and fiscal policy, on sovereign spread and exchange rate daily movements in Brazil, during the period surrounding the 2002 macroeconomic crisis. The results show that fiscal events have significantly influenced sovereign spreads and exchange rates in that period. Furthermore, fiscal policy actions appear to have contributed to movements in the exchange rates more than unanticipated monetary policy manoeuvres. The findings also suggest that, at that time, fiscal policy might have pushed the economy into an equilibrium in which increases in the policy intervention rate were likely to be associated with a depreciation, rather than an appreciation of the exchange rate.Monetary Policy, Fiscal Policy, joint analysis of fiscal and monetary policy