Governance of International Banking: The Financial Trilemma - Oxford Scholarship
Consistent with this hypothesis, in the empirical application we find that effects of financial restrictions on the exchange rate are short-lived, and significant only when banking limits bind. Moreover, we find significant effects on portfolio balances when banks are faced with binding constraints. Finally, we find that exchange rate effects are larger in episodes when Colombia's central bank intervened in the foreign exchange market.
In this paper we analyze the effects of financial constraints on the exchange rate through the portfolio balance channel. Our contribution is twofold: First, we construct a tractable two-period general equilibrium model in which financial constraints inhibit capital flows.
Hence, departures from the uncovered interest rate parity condition are used to explain the effects of sterilized foreign exchange intervention. Second, using high frequency data during , we use a sharp policy discontinuity within Colombian regulatory banking limits to empirically test for the portfolio balance channel. Consistent with our model's postulations, our findings suggest that the effects on the exchange rate are short-lived, and significant only when banking constraints are binding.
Online seminar – Decrypting Sustainable Finance
Read more about the BIS. Central bank hub The BIS facilitates dialogue, collaboration and information-sharing among central banks and other authorities that are responsible for promoting financial stability. Read more about our central bank hub. In their account of The low interest rate environment, global liquidity spillovers and challenges for monetary policy ahead , they argue that keeping interest rates low for a prolonged period may have negative side effects, in particular in terms of deferred bank balance sheet repair and excess liquidity creation, which may lay the foundation for a future bubble.
Thus the authors suggest a well-communicated exit from unconventional monetary policies. It is in this respect that they argue in favor of a careful global coordination of monetary policies among the major central banks. All papers presented in this special issue clearly show that policymakers will ultimately have to decide how much global or for the Eurozone — regional banking we can afford without compromising financial stability under a realistic assessment of how much global and regional cooperation and regulation we can reasonably expect in the years to come.
Here you also find links to two interviews taken on the day of the symposium with two panelists, Paul Wachtel and Hans-Helmut Kotz. Skip to main content Skip to sections. Advertisement Hide. Download PDF.
Resolution of international banks: Can smaller countries cope?
Symposium Introduction First Online: 02 June Footnotes 1. Committee on International Economic Policy and Reform. Brookings: Washington DC, September. Google Scholar.
Schoenmaker, D. This book brings together classic articles and recent contributions to this important field of research. It provides comprehensive coverage of the role of liquidity in financial crises and is divided into five parts: i liquidity and interbank markets; ii the public provision of liquidity and regulation; iii money, liquidity and asset prices; iv contagion effects; v financial crises and currency crises.
The book offers an economic history of financial crises, empirical studies of crises in the modern era and classic works on the theory of banking crises. It also covers specialized topics, with sections on currency crises and financial contagion. Undergraduate students of money, banking, macroeconomics and financial crises alike will find this collection to be an invaluable overview of a critical area of study.
Can financial crises be anticipated or even avoided?
What can be done to lessen their impact? Should governments and international institutions intervene? Or should financial crises be left to run their course? In the aftermath of the recent Asian financial crisis, many blamed international institutions, corruption, governments, and flawed macro and microeconomic policies not only for causing the crisis but also unnecessarily lengthening and deepening it.
Based on ten years of research, the authors develop a theoretical approach to analyzing financial crises. Beginning with a review of the history of financial crises and providing readers with the basic economic tools needed to understand the literature, the authors construct a series of increasingly sophisticated models.
Throughout, the authors guide the reader through the existing theoretical and empirical literature while also building on their own theoretical approach.
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The text presents the modern theory of intermediation, introduces asset markets and the causes of asset price volatility, and discusses the interaction of banks and markets. The book also deals with more specialized topics, including optimal financial regulation, bubbles, and financial contagion. Taking a strong unifying theoretical perspective it provides a unique comparative survey of financial systems in the UK, Germany, France, Italy, Scandinavia and the USA. The book also reviews the economic foundations of macroprudential policy.
Conventional macroeconomics is based on assumptions that may work for the analysis of price stability and the conduct of monetary policy, but which more or less rules out the possibility of financial crises. This book introduces an alternative macroeconomics where crises can flourish, identifying the market failures which justify interventions to stabilize the system.
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- Governance of International Banking: The Financial Trilemma!
Such a compendium is overdue. Since the publication of the The Microeconomics of Banking by Xavier Freixas and Jean Charles Rochet, work in empirical banking has further blossomed, not only in sheer volume but also in the variety of questions being tackled, datasets becoming available, and methodologies being introduced. Each chapter in Microeconometrics of Banking contains a modest introduction where possible and appropriate , a concise methodology section with one or more relevant methodologies, and several illustrative applications.
Against this backdrop, this thought provoking book provides a platform for the leading international experts to discuss and encourage future debate on financial stability. The breadth and scope of the issues addressed reflect the challenge of developing and consistently implementing a coherent set of financial reforms to promote financial stability.
The book advocates the development of financial reforms that are effective in striking the optimal balance between realizing the enormous benefits of efficient financial intermediation, capital allocation and risk management on the one hand, and controlling systemic risks and maintaining financial stability on the other. Instead, systemic risk and macroprudential regulation have come to the forefront of the new regulatory paradigm. Yet our knowledge of these two core aspects of regulation is still limited and fragmented. This book offers a framework for understanding the reasons for the regulatory shift from a microprudential to a macroprudential approach to financial regulation.
It defines systemic risk and macroprudential policy, cutting through the generalized confusion as to their meaning; contrasts macroprudential to microprudential approaches; discusses the interaction of macroprudential policy with macroeconomic policy monetary policy in particular ; and describes macroprudential tools and experiences with macroprudential regulation around the world. The book also considers the remaining challenges for establishing effective macroprudential policy and broader issues in regulatory reform. These include the optimal size and structure of the financial system, the multiplicity of regulatory bodies in the United States, the supervision of cross-border financial institutions, and the need for international cooperation on macroprudential policies.
The asymmetric information model, extremely powerful in many areas of economic theory, has proven useful in banking theory both for explaining the role of banks in the economy and for pointing out structural weaknesses in the banking sector that may justify government intervention.
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- Sole Survivors of the Sea.
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- Present State and Future Needs in General Practice.
In the past, banking courses in most doctoral programs in economics, business, or finance focused either on management or monetary issues and their macroeconomic consequences; a microeconomic theory of banking did not exist because the Arrow-Debreu general equilibrium model of complete contingent markets the standard reference at the time was unable to explain the role of banks in the economy.
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