Andreas Busch
- Published in print:
- 2008
- Published Online:
- January 2009
- ISBN:
- 9780199218813
- eISBN:
- 9780191711763
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199218813.003.0005
- Subject:
- Political Science, International Relations and Politics, Political Economy
This chapter examines banking regulation in the United Kingdom. It begins with a description of the historical development of the banking system and its regulatory structure, followed by an ...
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This chapter examines banking regulation in the United Kingdom. It begins with a description of the historical development of the banking system and its regulatory structure, followed by an examination of the relevant protagonists involved in this policy field. It then considers the interplay between crises and reforms which have influenced bank regulation during this period. It argues that regulatory policy in the UK was largely characterized by a reaction to crises in the banking sector (such as the Secondary Banking Crisis in the 1970s, the failure of JMB in the 1980s, and the cases of BCCI and Barings in the 1990s). A weak role for the UK Parliament let the Bank of England initially dominate a ‘club-style’ sectoral policy network. After repeated piecemeal reforms failed to provide long-term stability, the latter was disempowered in favour of a new unified financial regulatory agency, thus providing an example of major institutional change.Less
This chapter examines banking regulation in the United Kingdom. It begins with a description of the historical development of the banking system and its regulatory structure, followed by an examination of the relevant protagonists involved in this policy field. It then considers the interplay between crises and reforms which have influenced bank regulation during this period. It argues that regulatory policy in the UK was largely characterized by a reaction to crises in the banking sector (such as the Secondary Banking Crisis in the 1970s, the failure of JMB in the 1980s, and the cases of BCCI and Barings in the 1990s). A weak role for the UK Parliament let the Bank of England initially dominate a ‘club-style’ sectoral policy network. After repeated piecemeal reforms failed to provide long-term stability, the latter was disempowered in favour of a new unified financial regulatory agency, thus providing an example of major institutional change.
Yasuhiro Arikawa and Hideaki Miyajima
- Published in print:
- 2007
- Published Online:
- September 2007
- ISBN:
- 9780199284511
- eISBN:
- 9780191713705
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199284511.003.0002
- Subject:
- Economics and Finance, South and East Asia
This chapter examines the changes in the Japanese main banking system. Despite the deregulation of bond markets in the mid-1990s, the overall dependence of firms on bank borrowing increased rather ...
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This chapter examines the changes in the Japanese main banking system. Despite the deregulation of bond markets in the mid-1990s, the overall dependence of firms on bank borrowing increased rather than decreased among listed firms during the 1990s. Large firms lessened their ties with banks and began financing through bonds, yet smaller listed firms continued borrowing from banks. In particular, firms with previously high levels of bank debt relied on their main bank for an increasing proportion of those loans. By estimating the employment adjustment function, the chapter shows that the main banks did not effectively discipline corporate restructuring, although banks encouraged the restructuring of firms with a relatively better performance. As Japan recovers from the banking crisis, main bank relationships are likely to survive among a segment of smaller and less internationalized Japanese firms.Less
This chapter examines the changes in the Japanese main banking system. Despite the deregulation of bond markets in the mid-1990s, the overall dependence of firms on bank borrowing increased rather than decreased among listed firms during the 1990s. Large firms lessened their ties with banks and began financing through bonds, yet smaller listed firms continued borrowing from banks. In particular, firms with previously high levels of bank debt relied on their main bank for an increasing proportion of those loans. By estimating the employment adjustment function, the chapter shows that the main banks did not effectively discipline corporate restructuring, although banks encouraged the restructuring of firms with a relatively better performance. As Japan recovers from the banking crisis, main bank relationships are likely to survive among a segment of smaller and less internationalized Japanese firms.
Hans Degryse, Moshe Kim, and Steven Ongena
- Published in print:
- 2009
- Published Online:
- October 2011
- ISBN:
- 9780195340471
- eISBN:
- 9780199852406
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195340471.003.0011
- Subject:
- Economics and Finance, Microeconomics
This chapter provides an epilogue on the banking crisis of 2007–2008. It briefly discusses empirical work that investigates one of the root causes of the banking crisis: the abundance of liquidity ...
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This chapter provides an epilogue on the banking crisis of 2007–2008. It briefly discusses empirical work that investigates one of the root causes of the banking crisis: the abundance of liquidity and low short-term interest rates. When monetary policy is expansive, not only do banks give more loans to borrowers with either a bad or no credit history, but also the new loans themselves are more hazardous. Major problems in the credit markets first surfaced in the summer of 2007. Since then, liquidity has recurrently evaporated almost entirely from the interbank markets, and central banks have intervened worldwide on a scale not often seen before. This banking crisis is a source for research for many years to come.Less
This chapter provides an epilogue on the banking crisis of 2007–2008. It briefly discusses empirical work that investigates one of the root causes of the banking crisis: the abundance of liquidity and low short-term interest rates. When monetary policy is expansive, not only do banks give more loans to borrowers with either a bad or no credit history, but also the new loans themselves are more hazardous. Major problems in the credit markets first surfaced in the summer of 2007. Since then, liquidity has recurrently evaporated almost entirely from the interbank markets, and central banks have intervened worldwide on a scale not often seen before. This banking crisis is a source for research for many years to come.
Kern Alexander, Rahul Dhumale, and John Eatwell
- Published in print:
- 2005
- Published Online:
- September 2007
- ISBN:
- 9780195166989
- eISBN:
- 9780199783861
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195166989.003.0010
- Subject:
- Economics and Finance, Financial Economics
This chapter examines the link between the relative level of an individual bank's adequacy and the fragility of the banking system. Specifically, the probability of a banking crisis is modeled, using ...
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This chapter examines the link between the relative level of an individual bank's adequacy and the fragility of the banking system. Specifically, the probability of a banking crisis is modeled, using one characteristic of individual banks — their capital adequacy ratios. It considers the responses of banks in three Asian countries: Thailand, Indonesia, and South Korea. The importance of distinguishing between cosmetic and effective changes to capital adequacy ratios to avoid the systemic threats that can grow out of microeconomic weaknesses in domestic banking systems, as witnessed in Asia, is discussed.Less
This chapter examines the link between the relative level of an individual bank's adequacy and the fragility of the banking system. Specifically, the probability of a banking crisis is modeled, using one characteristic of individual banks — their capital adequacy ratios. It considers the responses of banks in three Asian countries: Thailand, Indonesia, and South Korea. The importance of distinguishing between cosmetic and effective changes to capital adequacy ratios to avoid the systemic threats that can grow out of microeconomic weaknesses in domestic banking systems, as witnessed in Asia, is discussed.
Helge W. Nordvik
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198288039
- eISBN:
- 9780191596230
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288034.003.0018
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Economic History
Begins with an account of the development of the Norwegian banking system before the First World War and then examines the long and severe banking crisis of 1923–28, and the policies adopted ...
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Begins with an account of the development of the Norwegian banking system before the First World War and then examines the long and severe banking crisis of 1923–28, and the policies adopted following the decision to leave the gold standard in 1931. In the 1920s, the deflationary policy pursued by the Bank of Norway in order to return to the gold standard at the old 1914 parity was responsible, together with the exceptional boom that the banking sector had experienced during the war years, for the severity of the banking crisis and for the slow real growth of the Norwegian economy. By contrast, the depreciation of the currency in 1931 contributed in important ways to the successful recovery and subsequent favourable growth record of the economy in the 1930s.Less
Begins with an account of the development of the Norwegian banking system before the First World War and then examines the long and severe banking crisis of 1923–28, and the policies adopted following the decision to leave the gold standard in 1931. In the 1920s, the deflationary policy pursued by the Bank of Norway in order to return to the gold standard at the old 1914 parity was responsible, together with the exceptional boom that the banking sector had experienced during the war years, for the severity of the banking crisis and for the slow real growth of the Norwegian economy. By contrast, the depreciation of the currency in 1931 contributed in important ways to the successful recovery and subsequent favourable growth record of the economy in the 1930s.
Gerd Hardach
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198288039
- eISBN:
- 9780191596230
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288034.003.0010
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Economic History
The focus of this chapter is not on the short‐term fluctuations experienced by the German banks during the inter‐war period, but on the structural change that ultimately resulted in the formation of ...
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The focus of this chapter is not on the short‐term fluctuations experienced by the German banks during the inter‐war period, but on the structural change that ultimately resulted in the formation of a national banking system. The banking system of the early twentieth century was not a rational construct, but had evolved over the previous hundred years and consisted of a mixture of quite different financial intermediaries defined by a combination of legal provisions, ownership, economic philosophy, and business structure. Post‐war hyperinflation was followed by financial reconstruction, but the system collapsed in the banking crisis of 1931 and was reorganized under the Banking Law of 1934 as a monopolistic structure under strict government surveillance. The resulting system fitted the Nazi regime of armament and autarky, but was not an adequate model for the expanding world economy created after World War II.Less
The focus of this chapter is not on the short‐term fluctuations experienced by the German banks during the inter‐war period, but on the structural change that ultimately resulted in the formation of a national banking system. The banking system of the early twentieth century was not a rational construct, but had evolved over the previous hundred years and consisted of a mixture of quite different financial intermediaries defined by a combination of legal provisions, ownership, economic philosophy, and business structure. Post‐war hyperinflation was followed by financial reconstruction, but the system collapsed in the banking crisis of 1931 and was reorganized under the Banking Law of 1934 as a monopolistic structure under strict government surveillance. The resulting system fitted the Nazi regime of armament and autarky, but was not an adequate model for the expanding world economy created after World War II.
Hans Degryse, Moshe Kim, and Steven Ongena
- Published in print:
- 2009
- Published Online:
- October 2011
- ISBN:
- 9780195340471
- eISBN:
- 9780199852406
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195340471.003.0010
- Subject:
- Economics and Finance, Microeconomics
This chapter concludes the study by summarizing the existing evidence and by providing a list of topics for further research. The list includes issues, such as the effect of the two-stage “purchasing ...
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This chapter concludes the study by summarizing the existing evidence and by providing a list of topics for further research. The list includes issues, such as the effect of the two-stage “purchasing process” in credit markets on the estimated relationships; the development of loan conditions throughout the life-cycle of the bank; bank organization and its impact on competition; the geography of bank financing; the impact of technology on bank organization, banking geography, and banking activities; the role banks play in the development of emerging economies; the effects of monetary policy on bank behavior; the impact of the development of the regulatory and wider institutional framework on competition and bank rents; the interrelationships between social capital, trust, and the functioning of financial markets; and the causes of the banking crisis that started in August 2007 and the consequences on the development of banking products and banking in general.Less
This chapter concludes the study by summarizing the existing evidence and by providing a list of topics for further research. The list includes issues, such as the effect of the two-stage “purchasing process” in credit markets on the estimated relationships; the development of loan conditions throughout the life-cycle of the bank; bank organization and its impact on competition; the geography of bank financing; the impact of technology on bank organization, banking geography, and banking activities; the role banks play in the development of emerging economies; the effects of monetary policy on bank behavior; the impact of the development of the regulatory and wider institutional framework on competition and bank rents; the interrelationships between social capital, trust, and the functioning of financial markets; and the causes of the banking crisis that started in August 2007 and the consequences on the development of banking products and banking in general.
Joost Jonker and Jan Luiten van Zanden
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198288039
- eISBN:
- 9780191596230
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288034.003.0003
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Economic History
This investigation of the banking crises experienced in 12 European industrial countries and the USA attempts to establish a common pattern and to identify explanations for the timing and occurrence ...
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This investigation of the banking crises experienced in 12 European industrial countries and the USA attempts to establish a common pattern and to identify explanations for the timing and occurrence of the crises. The authors find that all crises occurred during years of deflation, but not every deflationary shock led to a run on the banks. In their view, the reasons why banks in some countries were vulnerable to such shocks, and others were not, are closely related to the differing degrees of inflation experienced during and just after the First World War. The conclusion drawn from the study is that the poor quality of the banks’ assets and the reduction in the liquidity associated with the increased commitments to industry were a leading cause of banking crises, but that nevertheless this lending had been a rational policy for the banks in countries that had suffered rapid inflation during and after the war.Less
This investigation of the banking crises experienced in 12 European industrial countries and the USA attempts to establish a common pattern and to identify explanations for the timing and occurrence of the crises. The authors find that all crises occurred during years of deflation, but not every deflationary shock led to a run on the banks. In their view, the reasons why banks in some countries were vulnerable to such shocks, and others were not, are closely related to the differing degrees of inflation experienced during and just after the First World War. The conclusion drawn from the study is that the poor quality of the banks’ assets and the reduction in the liquidity associated with the increased commitments to industry were a leading cause of banking crises, but that nevertheless this lending had been a rational policy for the banks in countries that had suffered rapid inflation during and after the war.
Youssef Cassis
- Published in print:
- 2011
- Published Online:
- May 2011
- ISBN:
- 9780199600861
- eISBN:
- 9780191724930
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199600861.003.0004
- Subject:
- Business and Management, Finance, Accounting, and Banking, Business History
Massive bank runs and a succession of bank failures are only one aspect of banking crises, and not necessarily the main one as far as large banks are concerned. The main issue has been whether the ...
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Massive bank runs and a succession of bank failures are only one aspect of banking crises, and not necessarily the main one as far as large banks are concerned. The main issue has been whether the banks had become too big to fail, which implies that big banks no longer fail in times of financial crises, though they can run into serious difficulties. One corollary of this situation is that banks could or should be cut down to size in order to avoid pitfalls: on the one hand, the ‘moral hazard’ created by the certainty of being bailed out in case of failure, and, on the other hand, the systemic effects of the collapse of a big bank. This chapter discusses these issues from a historical perspective, by considering how banks have fared in the wake of eight major financial crises that have shaken the advanced economies since 1890. Three main questions are addressed in this chapter. First, to what extent have big banks actually been allowed to fail? Second, have financial crises been followed by waves of consolidation? And, third, how have large banks performed in the aftermath of a crisis — especially in terms of growth and profits?Less
Massive bank runs and a succession of bank failures are only one aspect of banking crises, and not necessarily the main one as far as large banks are concerned. The main issue has been whether the banks had become too big to fail, which implies that big banks no longer fail in times of financial crises, though they can run into serious difficulties. One corollary of this situation is that banks could or should be cut down to size in order to avoid pitfalls: on the one hand, the ‘moral hazard’ created by the certainty of being bailed out in case of failure, and, on the other hand, the systemic effects of the collapse of a big bank. This chapter discusses these issues from a historical perspective, by considering how banks have fared in the wake of eight major financial crises that have shaken the advanced economies since 1890. Three main questions are addressed in this chapter. First, to what extent have big banks actually been allowed to fail? Second, have financial crises been followed by waves of consolidation? And, third, how have large banks performed in the aftermath of a crisis — especially in terms of growth and profits?
Gianni Toniolo
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198288039
- eISBN:
- 9780191596230
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288034.003.0011
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Economic History
Examines the evolution of the Italian banking industry, with particular reference to the behaviour of the mixed (universal) banks, and to the relief operations that culminated in extensive state ...
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Examines the evolution of the Italian banking industry, with particular reference to the behaviour of the mixed (universal) banks, and to the relief operations that culminated in extensive state involvement in industry. The process began with the banking crisis of 1921–22, when the State used the Bank of Italy to rescue both—a major bank and a large industrial concern. In the 1920s, the banks acquired industrial stocks on a massive scale, and many ended with risky and illiquid portfolios. When industrial demand collapsed in 1931, there was the potential for a major banking crisis, and this was only averted by substantial secret loans and last‐resort credits to the banks from the State and the Bank of Italy. State ownership of the industrial concerns was formally recognized by the creation in 1933 of IRI (Istituto per la Ricostruzione Industriale), and the banking system was reorganized under the Banking Act of 1936.Less
Examines the evolution of the Italian banking industry, with particular reference to the behaviour of the mixed (universal) banks, and to the relief operations that culminated in extensive state involvement in industry. The process began with the banking crisis of 1921–22, when the State used the Bank of Italy to rescue both—a major bank and a large industrial concern. In the 1920s, the banks acquired industrial stocks on a massive scale, and many ended with risky and illiquid portfolios. When industrial demand collapsed in 1931, there was the potential for a major banking crisis, and this was only averted by substantial secret loans and last‐resort credits to the banks from the State and the Bank of Italy. State ownership of the industrial concerns was formally recognized by the creation in 1933 of IRI (Istituto per la Ricostruzione Industriale), and the banking system was reorganized under the Banking Act of 1936.
Youssef Cassis
- Published in print:
- 2011
- Published Online:
- May 2011
- ISBN:
- 9780199600861
- eISBN:
- 9780191724930
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199600861.003.0003
- Subject:
- Business and Management, Finance, Accounting, and Banking, Business History
This chapter discusses the four major financial crises that broke out in the core industrial countries between the end of Bretton Woods in 1971 and the early 21st century: the Financial Instability ...
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This chapter discusses the four major financial crises that broke out in the core industrial countries between the end of Bretton Woods in 1971 and the early 21st century: the Financial Instability of the early 1970s and the ensuing bank failures, especially in Britain, Germany, and the United States, within the context of ‘stagflation’ and the end of fixed exchange rates; the International Debt Crisis of 1982, when the international financial system was threatened with collapse; the Japanese Banking Crisis of 1997–8, which undermined the financial system of the world's second largest economic power; and the Financial Debacle of 2007–8.Less
This chapter discusses the four major financial crises that broke out in the core industrial countries between the end of Bretton Woods in 1971 and the early 21st century: the Financial Instability of the early 1970s and the ensuing bank failures, especially in Britain, Germany, and the United States, within the context of ‘stagflation’ and the end of fixed exchange rates; the International Debt Crisis of 1982, when the international financial system was threatened with collapse; the Japanese Banking Crisis of 1997–8, which undermined the financial system of the world's second largest economic power; and the Financial Debacle of 2007–8.
Hans Degryse, Moshe Kim, and Steven Ongena
- Published in print:
- 2009
- Published Online:
- October 2011
- ISBN:
- 9780195340471
- eISBN:
- 9780199852406
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195340471.003.0007
- Subject:
- Economics and Finance, Microeconomics
This chapter looks at individual bank runs and systemic risk featuring the evidence on the determinants of banking crises: market and economic conditions, implications of banking crises and their ...
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This chapter looks at individual bank runs and systemic risk featuring the evidence on the determinants of banking crises: market and economic conditions, implications of banking crises and their results, regulation and banking crises, and interbank market exposure and contagion. Preventing banking crises has thus far been a frustrating exercise, as the frequency and number of crises seem to have been increasing. Thus, understanding of the reasons behind and the consequences of bank runs and panics is of utmost importance. This chapter attempts to explain the probable reasons for individual bank runs and the association and perhaps causation between market structure and contagion. It also tries to evaluate the effects of banking crises on the economy as a whole and assess their effects on the propagation and prolongation of recessions.Less
This chapter looks at individual bank runs and systemic risk featuring the evidence on the determinants of banking crises: market and economic conditions, implications of banking crises and their results, regulation and banking crises, and interbank market exposure and contagion. Preventing banking crises has thus far been a frustrating exercise, as the frequency and number of crises seem to have been increasing. Thus, understanding of the reasons behind and the consequences of bank runs and panics is of utmost importance. This chapter attempts to explain the probable reasons for individual bank runs and the association and perhaps causation between market structure and contagion. It also tries to evaluate the effects of banking crises on the economy as a whole and assess their effects on the propagation and prolongation of recessions.
Michel Lescure
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198288039
- eISBN:
- 9780191596230
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198288034.003.0012
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Economic History
The inter‐war years were a period of decay for the French banks. Their problems began during the inflationary years of the First World War and continued until the stabilization of the franc in 1926. ...
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The inter‐war years were a period of decay for the French banks. Their problems began during the inflationary years of the First World War and continued until the stabilization of the franc in 1926. There was a sharp fall in the total assets of the banking system relative to the national income and in the real value of their capital funds, and also a reduction in the share of their resources devoted to loans and credits to enterprises. There was a limited recovery at the end of the 1920s, but then a succession of crises, first in 1930 and 1931 and then again in 1934. The crises were relatively mild but particularly affected the universal banks, and the smaller regional and personal banks, rather than the large joint‐stock banks and the specialized banks.Less
The inter‐war years were a period of decay for the French banks. Their problems began during the inflationary years of the First World War and continued until the stabilization of the franc in 1926. There was a sharp fall in the total assets of the banking system relative to the national income and in the real value of their capital funds, and also a reduction in the share of their resources devoted to loans and credits to enterprises. There was a limited recovery at the end of the 1920s, but then a succession of crises, first in 1930 and 1931 and then again in 1934. The crises were relatively mild but particularly affected the universal banks, and the smaller regional and personal banks, rather than the large joint‐stock banks and the specialized banks.
Charles H. Feinstein, Peter Temin, and Gianni Toniolo
- Published in print:
- 2008
- Published Online:
- May 2008
- ISBN:
- 9780195307559
- eISBN:
- 9780199867929
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195307559.003.0007
- Subject:
- Economics and Finance, Economic History
The descent into the depression left bankers, politicians, industrialists, and farmers seemingly helpless in the face of the successive currency and banking crises, growing stocks of unsold food, ...
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The descent into the depression left bankers, politicians, industrialists, and farmers seemingly helpless in the face of the successive currency and banking crises, growing stocks of unsold food, falling prices, and ever-lengthening queues of men and women waiting desperately for work or for relief payments. This chapter traces the movement into the crisis as it developed and spread as the gold standard broke down, describing the course of the Great Depression in the main areas of the world. A fundamental shift in policy, the abandonment of the gold standard, was needed to arrest this economic contraction. The chapter also considers whether a change of policy in Germany could have forestalled the Nazi regime which imposed horrible costs on Germany and the world.Less
The descent into the depression left bankers, politicians, industrialists, and farmers seemingly helpless in the face of the successive currency and banking crises, growing stocks of unsold food, falling prices, and ever-lengthening queues of men and women waiting desperately for work or for relief payments. This chapter traces the movement into the crisis as it developed and spread as the gold standard broke down, describing the course of the Great Depression in the main areas of the world. A fundamental shift in policy, the abandonment of the gold standard, was needed to arrest this economic contraction. The chapter also considers whether a change of policy in Germany could have forestalled the Nazi regime which imposed horrible costs on Germany and the world.
Guillermo Perry and Luis Servén
- Published in print:
- 2004
- Published Online:
- August 2004
- ISBN:
- 9780199271405
- eISBN:
- 9780191601200
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271402.003.0012
- Subject:
- Economics and Finance, Economic Systems
The Argentine crisis has been variously blamed on fiscal imbalances, real overvaluation, and self-fulfilling investor pessimism triggering a capital flow reversal. This chapter provides a full ...
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The Argentine crisis has been variously blamed on fiscal imbalances, real overvaluation, and self-fulfilling investor pessimism triggering a capital flow reversal. This chapter provides a full assessment of the role of these and other ingredients in the collapse. It shows that in the final years of its Convertibility program, Argentina was not hit harder than other emerging markets in Latin America by global terms-of-trade shocks and financial disturbances. Hence the crisis reflects primarily the high vulnerability to disturbances built into Argentina’s policy framework. These fragilities reinforced each other in such a way that taken jointly they led to a much larger vulnerability to adverse external shocks than in any other country in the region.Less
The Argentine crisis has been variously blamed on fiscal imbalances, real overvaluation, and self-fulfilling investor pessimism triggering a capital flow reversal. This chapter provides a full assessment of the role of these and other ingredients in the collapse. It shows that in the final years of its Convertibility program, Argentina was not hit harder than other emerging markets in Latin America by global terms-of-trade shocks and financial disturbances. Hence the crisis reflects primarily the high vulnerability to disturbances built into Argentina’s policy framework. These fragilities reinforced each other in such a way that taken jointly they led to a much larger vulnerability to adverse external shocks than in any other country in the region.
E. Philip Davis
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198233312
- eISBN:
- 9780191596124
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198233310.003.0009
- Subject:
- Economics and Finance, Financial Economics
Given the focus of the analyses in Chs. 6 and 7 on six major periods of instability since 1970, it is useful to outline the events of other selected periods of crisis. We look for example at the ...
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Given the focus of the analyses in Chs. 6 and 7 on six major periods of instability since 1970, it is useful to outline the events of other selected periods of crisis. We look for example at the Overend Gurney from 1866 in the UK, the US Great Depression, Continental Illinois in the US, Penn Central in the US, and the Norwegian banking crisis. Such an approach serves several purposes; first, it indicates the generality or otherwise of the mechanisms outlined in a wider range of financial markets (common features of the events are summarized in Table 8.1); second, it may offer additional insights into the links between financial fragility and systemic risk; third, by offering a wider sample, it facilitates a broader analysis of the different types of crisis. Given the degree to which some of these events have been studied, the accounts are inevitably partial; further details can be obtained from the references.Less
Given the focus of the analyses in Chs. 6 and 7 on six major periods of instability since 1970, it is useful to outline the events of other selected periods of crisis. We look for example at the Overend Gurney from 1866 in the UK, the US Great Depression, Continental Illinois in the US, Penn Central in the US, and the Norwegian banking crisis. Such an approach serves several purposes; first, it indicates the generality or otherwise of the mechanisms outlined in a wider range of financial markets (common features of the events are summarized in Table 8.1); second, it may offer additional insights into the links between financial fragility and systemic risk; third, by offering a wider sample, it facilitates a broader analysis of the different types of crisis. Given the degree to which some of these events have been studied, the accounts are inevitably partial; further details can be obtained from the references.
E. Philip Davis
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198233312
- eISBN:
- 9780191596124
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198233310.003.0010
- Subject:
- Economics and Finance, Financial Economics
Chapters 9 and 10 were written for the Second Edition of the book in mid 1994. This chapter seeks to provide further evidence on the importance of the mechanisms of financial fragility and ...
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Chapters 9 and 10 were written for the Second Edition of the book in mid 1994. This chapter seeks to provide further evidence on the importance of the mechanisms of financial fragility and instability, and of the appropriateness of the framework for analysis provided in the book itself, based on experience over the recessionary period of 1990–3. This chapter is structured as follows: in the first section, we assess experience of financial fragility over 1988–93, using as material various indicators at a macroeconomic level. Following the analysis of Ch. 4, a general pattern of financial fragility is sketched and traced in the data for a number of countries. In this context, particular focus is laid on the interrelation between asset prices and credit, as well as the potential importance of moral hazard and adverse selection. The second section complements this analysis by sketching the results of a number of more detailed studies of issues in financial fragility that have been made at a national level, and which are nonetheless considered to have a broader applicability. In the third section, four further periods of systemic risk, namely the banking crises in Finland, Sweden, and Japan, and the collapse of activity in the ECU bond market in 1992, are analysed in the light of the framework for analysis developed in Chs. 5 and 7. The degree to which they confirm the generality of the phenomena outlined earlier in the book is considered in a final part of this section.Less
Chapters 9 and 10 were written for the Second Edition of the book in mid 1994. This chapter seeks to provide further evidence on the importance of the mechanisms of financial fragility and instability, and of the appropriateness of the framework for analysis provided in the book itself, based on experience over the recessionary period of 1990–3. This chapter is structured as follows: in the first section, we assess experience of financial fragility over 1988–93, using as material various indicators at a macroeconomic level. Following the analysis of Ch. 4, a general pattern of financial fragility is sketched and traced in the data for a number of countries. In this context, particular focus is laid on the interrelation between asset prices and credit, as well as the potential importance of moral hazard and adverse selection. The second section complements this analysis by sketching the results of a number of more detailed studies of issues in financial fragility that have been made at a national level, and which are nonetheless considered to have a broader applicability. In the third section, four further periods of systemic risk, namely the banking crises in Finland, Sweden, and Japan, and the collapse of activity in the ECU bond market in 1992, are analysed in the light of the framework for analysis developed in Chs. 5 and 7. The degree to which they confirm the generality of the phenomena outlined earlier in the book is considered in a final part of this section.
Volbert Alexander, George M. von Furstenberg, and Jacques Mélitz (eds)
- Published in print:
- 2004
- Published Online:
- August 2004
- ISBN:
- 9780199271405
- eISBN:
- 9780191601200
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271402.001.0001
- Subject:
- Economics and Finance, Economic Systems
Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly ...
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Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly critical for the choice of currency denomination. Conversely, the exchange value and prospective usefulness of small currencies becomes less certain, and transaction costs for them may rise. Economic instability is invited as currency and portfolio substitution with the dominant international currency denomination increase the likelihood of currency mismatches and financial crises. In view of these failings of many of the financially small currencies, the number of currencies worldwide well may shrink greatly in the decades ahead.Drawing lessons mostly from contemporary developments, this book analyzes current approaches to overcoming excessive monetary division within integrating regions. It focuses on the effects of monetary or currency unions on trade among members and on their financial development and stability. In the process, contributors analyze the promise and subversion of hard pegs such as that attempted by the currency board of Argentina. They also examine unilateral dollarization -- adopted in a few countries formally, and in many more informally without giving up the local currency -- and multilateral monetary union in Europe. There the euro functions as an innovative, non-hegemonic form of internationally shared and co-managed fiat money that will also be adopted by the 2004 class of European-Union accession countries in coming years.Less
Financial services with global reach are a highly information-intensive business. In it, the ability to deliver reliable price formation, global liquidity, and network benefits is increasingly critical for the choice of currency denomination. Conversely, the exchange value and prospective usefulness of small currencies becomes less certain, and transaction costs for them may rise. Economic instability is invited as currency and portfolio substitution with the dominant international currency denomination increase the likelihood of currency mismatches and financial crises. In view of these failings of many of the financially small currencies, the number of currencies worldwide well may shrink greatly in the decades ahead.
Drawing lessons mostly from contemporary developments, this book analyzes current approaches to overcoming excessive monetary division within integrating regions. It focuses on the effects of monetary or currency unions on trade among members and on their financial development and stability. In the process, contributors analyze the promise and subversion of hard pegs such as that attempted by the currency board of Argentina. They also examine unilateral dollarization -- adopted in a few countries formally, and in many more informally without giving up the local currency -- and multilateral monetary union in Europe. There the euro functions as an innovative, non-hegemonic form of internationally shared and co-managed fiat money that will also be adopted by the 2004 class of European-Union accession countries in coming years.
Jordi Canals
- Published in print:
- 1997
- Published Online:
- October 2011
- ISBN:
- 9780198775065
- eISBN:
- 9780191695353
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198775065.003.0003
- Subject:
- Business and Management, Finance, Accounting, and Banking, Strategy
The banking crisis that shook the United States in the 1930s meant the end of the universal banking system that, until then, had shaped that and many other financial systems. In fact, the American ...
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The banking crisis that shook the United States in the 1930s meant the end of the universal banking system that, until then, had shaped that and many other financial systems. In fact, the American banking crisis was and still is the main historical experience customarily used as a reference point when establishing the limits of bank involvement in activities other than pure and simple financial intermediation. This chapter discusses the reasons for the banking crisis in the United States, and the relationship between the cause of the crisis and the universal banking system prevailing at that time. The Roosevelt administration initiated a large-scale reform of the financial system in response to the crisis. The so-called 1933 Banking Act represented a new approach to the problem of financial regulation which, for the first time, followed two distinct lines. On the one hand, there was the separation between financial intermediation or commercial banking activities and investment activities in financial assets or non-financial companies. On the other hand, there was the institution of a deposit insurance to guarantee that deposit holders would receive a certain minimum sum in the event that their bank should fail.Less
The banking crisis that shook the United States in the 1930s meant the end of the universal banking system that, until then, had shaped that and many other financial systems. In fact, the American banking crisis was and still is the main historical experience customarily used as a reference point when establishing the limits of bank involvement in activities other than pure and simple financial intermediation. This chapter discusses the reasons for the banking crisis in the United States, and the relationship between the cause of the crisis and the universal banking system prevailing at that time. The Roosevelt administration initiated a large-scale reform of the financial system in response to the crisis. The so-called 1933 Banking Act represented a new approach to the problem of financial regulation which, for the first time, followed two distinct lines. On the one hand, there was the separation between financial intermediation or commercial banking activities and investment activities in financial assets or non-financial companies. On the other hand, there was the institution of a deposit insurance to guarantee that deposit holders would receive a certain minimum sum in the event that their bank should fail.
Charles H. Feinstein, Peter Temin, and Gianni Toniolo
- Published in print:
- 2008
- Published Online:
- May 2008
- ISBN:
- 9780195307559
- eISBN:
- 9780199867929
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195307559.003.0004
- Subject:
- Economics and Finance, Economic History
This chapter looks first at some of the critical financial developments in the 1920s. These include the problems of inflation and hyper-inflation which afflicted almost all the European economies, ...
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This chapter looks first at some of the critical financial developments in the 1920s. These include the problems of inflation and hyper-inflation which afflicted almost all the European economies, and the instability of many of their banking systems. It then focuses on exchange rates, and analyses the different routes followed by the main countries in their attempts to stabilize their currencies and to return to the gold standard. The final theme in this chapter is the operation of the gold standard during this decade, and the reasons why it failed to provide the benefits in international trade and growth its advocates had anticipated.Less
This chapter looks first at some of the critical financial developments in the 1920s. These include the problems of inflation and hyper-inflation which afflicted almost all the European economies, and the instability of many of their banking systems. It then focuses on exchange rates, and analyses the different routes followed by the main countries in their attempts to stabilize their currencies and to return to the gold standard. The final theme in this chapter is the operation of the gold standard during this decade, and the reasons why it failed to provide the benefits in international trade and growth its advocates had anticipated.
