In this paper we investigate whether cross-sectional information from local equity markets contained information on devaluation expectations during the Asian crisis. We concentrate on the information content of equity prices as these markets were in general the largest and most liquid at the time and, thus, presumably the best carriers of information. Using an event-study approach for the period leading up to each of the devaluations which occurred during the Asian crisis (namely those of Indonesia, Korea, Malaysia, the Philippines and Thailand), we compare returns in the equity prices of exporting and non-exporting firms. This is based on the assumption that the expectation of a devaluation should help the stock of exporting firms outperform those of non-exporting firms. Overall we do find some evidence supporting this hypothesis, although at different degrees depending on the country. Our second finding is that local equity market prices, as reflected in the different patterns seen for exporters and non-exporters, did to at least to some extent price in the possibility that the Thai devaluation would be followed by other countries in the region.--

The experiences of seven countries that have undergone banking crises show that crises have significant implications for the short-run stability of the demand for money, the money multiplier, the transmission mechanism, and the signal variables of monetary policy. Monetary and credit instability, coupled with changes in the nature of the monetary and credit aggregates, complicate monetary management. These findings may require redesigning monetary instruments in favor of faster-reacting instruments, such as open market operations, and introducing additional indicators of the monetary stance, such as asset price and exchange rate movements. More frequent reviews of monetary programs may also be necessary.

The paper uses the P-STAR model to analyze Spanish prices from 1970 to 1996, adding the foreign price gap to the standard domestic definition of the P-STAR model (the domestic price gap) to assess the role German price movements played in Spanish inflation. The domestic price gap turns out to be the major explanatory variable for inflation, even after the entrance of Spain in the exchange rate mechanism (ERM). This result suggests that the successful disinflation experienced in Spain in the past few years may be more related to domestic conditions than to foreign ones.

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.

This note examines interest rate linkages within the EMS. Cointegration tests suggest the existence of a long-run equilibrium relationship between German and other EMS interest rates. Bivariate VAR analysis finds that Granger-causality either stems from German to other European interest rates (Belgium, France, Spain, and the U.K.) or is bidirectional (Denmark and the Netherlands). When allowance is made for the influence of U.S. interest rates, the pattern of Granger causality is predominantly bidirectional.

This paper assembles a bank-level dataset covering the operations of 38 international banks from eight industrial countries and their subsidiaries overseas during 1995-2004, and studies the extent of diversification gains from their local operations abroad. The paper finds that international banks with a larger share of assets allocated to foreign subsidiaries, particularly to those located in emerging market countries, are able to attain higher risk-adjusted returns. These gains are somewhat reduced- but by no means depleted-when international banks concentrate their subsidiaries in specific geographical regions. The paper also finds a substantial home bias in the international allocation of bank assets, relative to the results of a mean-variance portfolio optimization model. Overall, international diversification gains in banking appear to be substantial, albeit largely unexploited by current bank expansion strategies. These results suggest that international diversification gains could usefully be considered in the second pillar of Basel II as the first pillar is based only on the idiosyncratic risk of recipient countries.

Se analiza el desarrollo del sector financiero en América latina.

Se revisa la bibliografía sobre los determinantes del desarrollo financiero y a continuación se revisan los sistemas financieros de Asia y de Europa en cuanto a su tamaño y su eficiencia. El caso de España se analiza en mas detalle.