Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, the important question remains of why the ...
More
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, the important question remains of why the supporters of liberalization were so wrong. The chapter begins with the ‘debate in brief’, which presents the central arguments for and against CML. The next three sections look at the impact of capital market liberalization on stability, growth, and poverty. The chapter then discusses the impact of the international policy response to instability known as ‘bail-outs’. The sixth section presents a brief discussion on the interaction of capital market liberalization, political processes, and democracy.Less
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, the important question remains of why the supporters of liberalization were so wrong. The chapter begins with the ‘debate in brief’, which presents the central arguments for and against CML. The next three sections look at the impact of capital market liberalization on stability, growth, and poverty. The chapter then discusses the impact of the international policy response to instability known as ‘bail-outs’. The sixth section presents a brief discussion on the interaction of capital market liberalization, political processes, and democracy.
Joseph Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This book discusses the current debates on macroeconomics, capital market liberalization, and development, and develops a new framework within which one can assess alternative policies. The authors ...
More
This book discusses the current debates on macroeconomics, capital market liberalization, and development, and develops a new framework within which one can assess alternative policies. The authors share the belief that the Washington consensus has advocated for narrow goals for development (with a focus on price stability), prescribed too few policy instruments (emphasizing monetary and fiscal policies), and places unwarranted faith in the role of markets. The new framework focuses on real stability and long-term sustainable and equitable growth, offers a variety of non-standard ways to stabilize the economy and promote growth, and accepts that market imperfections necessitate government interventions. Economists have traditionally divided their field into macroeconomics and microeconomics, with macroeconomics further divided into stabilization policy and growth. Since most policy discussions and much of the assignment of institutional responsibilities have followed these divisions, policy-makers have pursued stabilization goals with little concern for growth consequences, while trying to increase growth through structural reforms focused on improving economic efficiency. Moreover, structural policies, such as capital market liberalization, have had major consequences for economic stability. This book challenges these divisions by arguing that stabilization policy has important consequences for long-term growth and has often been implemented with adverse consequences. The first part of the book introduces the key questions and looks at the objectives of economic policy from different perspectives. The second part examines the central issues of macroeconomics, presenting an analysis of economic models and policy perspectives on stabilization from conservative, Keynesian, and heterodox perspectives. The third part presents a similar analysis for capital market liberalization (CML).Less
This book discusses the current debates on macroeconomics, capital market liberalization, and development, and develops a new framework within which one can assess alternative policies. The authors share the belief that the Washington consensus has advocated for narrow goals for development (with a focus on price stability), prescribed too few policy instruments (emphasizing monetary and fiscal policies), and places unwarranted faith in the role of markets. The new framework focuses on real stability and long-term sustainable and equitable growth, offers a variety of non-standard ways to stabilize the economy and promote growth, and accepts that market imperfections necessitate government interventions. Economists have traditionally divided their field into macroeconomics and microeconomics, with macroeconomics further divided into stabilization policy and growth. Since most policy discussions and much of the assignment of institutional responsibilities have followed these divisions, policy-makers have pursued stabilization goals with little concern for growth consequences, while trying to increase growth through structural reforms focused on improving economic efficiency. Moreover, structural policies, such as capital market liberalization, have had major consequences for economic stability. This book challenges these divisions by arguing that stabilization policy has important consequences for long-term growth and has often been implemented with adverse consequences. The first part of the book introduces the key questions and looks at the objectives of economic policy from different perspectives. The second part examines the central issues of macroeconomics, presenting an analysis of economic models and policy perspectives on stabilization from conservative, Keynesian, and heterodox perspectives. The third part presents a similar analysis for capital market liberalization (CML).
Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0012
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, there are still a number of unresolved ...
More
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, there are still a number of unresolved controversies, including the fundamental issue of what types of capital market interventions governments should undertake, and more centrally, whether there exist any interventions for which the benefits exceed the costs. Given the importance that capital account interventions can play in macroeconomic policy-making, this chapter analyzes alternative modes of regulations, including case studies of Chile, Colombia, and Malaysia. Though economists have a strong proclivity for price-based interventions (taxes and subsidies) over quantity-based interventions (administrative restrictions and controls), theoretical work in economics has shown that sometimes quantity-based restrictions can reduce risk more effectively than price interventions. In addition to direct forms of interventions, such as taxes and restrictions on inflows and outflows, interventions in capital markets can also take on a variety of indirect forms such as limiting banks’ short-term foreign borrowing or applying adverse tax or bankruptcy treatment to foreign-denominated borrowing. Though the regulations vary in their methods, they generally serve to segment (or separate) the domestic and foreign exchange markets. The chapter concludes with a number of arguments for and against the various modes of capital market intervention.Less
Although there is now a general recognition that capital market liberalization failed to help developing countries achieve economic growth and stability, there are still a number of unresolved controversies, including the fundamental issue of what types of capital market interventions governments should undertake, and more centrally, whether there exist any interventions for which the benefits exceed the costs. Given the importance that capital account interventions can play in macroeconomic policy-making, this chapter analyzes alternative modes of regulations, including case studies of Chile, Colombia, and Malaysia. Though economists have a strong proclivity for price-based interventions (taxes and subsidies) over quantity-based interventions (administrative restrictions and controls), theoretical work in economics has shown that sometimes quantity-based restrictions can reduce risk more effectively than price interventions. In addition to direct forms of interventions, such as taxes and restrictions on inflows and outflows, interventions in capital markets can also take on a variety of indirect forms such as limiting banks’ short-term foreign borrowing or applying adverse tax or bankruptcy treatment to foreign-denominated borrowing. Though the regulations vary in their methods, they generally serve to segment (or separate) the domestic and foreign exchange markets. The chapter concludes with a number of arguments for and against the various modes of capital market intervention.
Bas van Bavel
- Published in print:
- 2010
- Published Online:
- May 2010
- ISBN:
- 9780199278664
- eISBN:
- 9780191707032
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199278664.003.0005
- Subject:
- History, European Medieval History
This chapter discusses the rise of market exchange in land, labour, capital, and goods in the 10th to 16th centuries. It focuses on the institutional framework in which exchange was organized, in ...
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This chapter discusses the rise of market exchange in land, labour, capital, and goods in the 10th to 16th centuries. It focuses on the institutional framework in which exchange was organized, in order to better understand the slow pace and regional unevenness of this process. It shows that a balance between social actors was crucial in the emergence of a favourable institutional framework. The strong position held by towns, merchants, craftsmen, and even peasants, and their associations, in some regions formed a main element in this balance. Public authorities, if held in check by such counter‐balances, could also contribute to the security of exchange and accessibility of markets. The effects are charted by way of various indicators. The chapter shows how first in Flanders, and later especially in Holland, the markets offered relatively high mobility of production factors, integrated labour markets, cheap credit, and low transaction costs.Less
This chapter discusses the rise of market exchange in land, labour, capital, and goods in the 10th to 16th centuries. It focuses on the institutional framework in which exchange was organized, in order to better understand the slow pace and regional unevenness of this process. It shows that a balance between social actors was crucial in the emergence of a favourable institutional framework. The strong position held by towns, merchants, craftsmen, and even peasants, and their associations, in some regions formed a main element in this balance. Public authorities, if held in check by such counter‐balances, could also contribute to the security of exchange and accessibility of markets. The effects are charted by way of various indicators. The chapter shows how first in Flanders, and later especially in Holland, the markets offered relatively high mobility of production factors, integrated labour markets, cheap credit, and low transaction costs.
Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0011
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Underlying the failure of CML was an overly simple model that assumed efficient and complete markets. There are, however, problems with externalities and weak or absent insurance markets, especially ...
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Underlying the failure of CML was an overly simple model that assumed efficient and complete markets. There are, however, problems with externalities and weak or absent insurance markets, especially in developing countries, that these models did not consider. This chapter focuses on major categories of ‘market failures’. It examines the direct externalities associated with capital flows, and looks at how capital market liberalization can exacerbate the problems posed by coordination failures and broader macroeconomic failures. It also looks at the effect of imperfect information on investor behavior and the market failures associated with capital markets. It concludes with a discussion of the major objectives of government intervention.Less
Underlying the failure of CML was an overly simple model that assumed efficient and complete markets. There are, however, problems with externalities and weak or absent insurance markets, especially in developing countries, that these models did not consider. This chapter focuses on major categories of ‘market failures’. It examines the direct externalities associated with capital flows, and looks at how capital market liberalization can exacerbate the problems posed by coordination failures and broader macroeconomic failures. It also looks at the effect of imperfect information on investor behavior and the market failures associated with capital markets. It concludes with a discussion of the major objectives of government intervention.
Roy C. Smith and Ingo Walter
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780195171679
- eISBN:
- 9780199783618
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195171675.001.0001
- Subject:
- Economics and Finance, Microeconomics
This book examines the effective governance, monitoring, and control of corporations and financial markets, drawing on the lessons of history and with a firm focus on the future. The book is divided ...
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This book examines the effective governance, monitoring, and control of corporations and financial markets, drawing on the lessons of history and with a firm focus on the future. The book is divided into four parts. Part I consists of two chapters: the first considers the nature, effects, and consequences of the bubble of 1995-2000; the second chapter assesses the more fundamental effects related to the evolving dominance of capital markets, which has changed the way corporate executives perceive their role and the expectations they are required to meet. Part II consists of three chapters that explore the internal governance function of corporations. Part III includes three chapters that examine the modern roles and practices of institutional investors, auditors, and banks and brokerages in conducting the fiduciary and governance functions allocated to them in the capital-market system. Part IV examines the evolution of the legal and regulatory system supporting the markets, and focuses on its troubling impotence as a consequence of modern political realities. It analyzes how conflicts of interest have become a more serious threat to the well-being of the market system than before.Less
This book examines the effective governance, monitoring, and control of corporations and financial markets, drawing on the lessons of history and with a firm focus on the future. The book is divided into four parts. Part I consists of two chapters: the first considers the nature, effects, and consequences of the bubble of 1995-2000; the second chapter assesses the more fundamental effects related to the evolving dominance of capital markets, which has changed the way corporate executives perceive their role and the expectations they are required to meet. Part II consists of three chapters that explore the internal governance function of corporations. Part III includes three chapters that examine the modern roles and practices of institutional investors, auditors, and banks and brokerages in conducting the fiduciary and governance functions allocated to them in the capital-market system. Part IV examines the evolution of the legal and regulatory system supporting the markets, and focuses on its troubling impotence as a consequence of modern political realities. It analyzes how conflicts of interest have become a more serious threat to the well-being of the market system than before.
Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0009
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter discusses advances in formal economic theory by examining how different positions among economists arise from their different assumptions and models. The discussion focuses on ways in ...
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This chapter discusses advances in formal economic theory by examining how different positions among economists arise from their different assumptions and models. The discussion focuses on ways in which real world economies differ from the ‘competitive equilibrium’ model that has become the benchmark model. The current benchmark competitive equilibrium framework includes new classical, representative agent, and real business cycle models which assume that all markets (including the labor market) have clear, perfect information, complete markets (including perfect capital and insurance markets), perfect wage and price flexibility, perfect competition, perfect rationality, and no externalities. If these models accurately portrayed reality, the economy would be efficient and there would be no need for government intervention. The assumptions of these models, however, are unrealistic and it is difficult to reconcile the required macro-formulations with what is known about microeconomic behavior (without resorting to ad hoc assumptions about the nature of the stochastic shocks to preferences and technology). The inadequacies of these models are even greater for developing countries where information imperfections are more pervasive and more markets are missing or incomplete (e.g., insurance markets). Accordingly, economic research since the 1990s has focused on identifying the most important limitations of the standard competitive model, particularly those limitations that help to explain the nature of economic volatility.Less
This chapter discusses advances in formal economic theory by examining how different positions among economists arise from their different assumptions and models. The discussion focuses on ways in which real world economies differ from the ‘competitive equilibrium’ model that has become the benchmark model. The current benchmark competitive equilibrium framework includes new classical, representative agent, and real business cycle models which assume that all markets (including the labor market) have clear, perfect information, complete markets (including perfect capital and insurance markets), perfect wage and price flexibility, perfect competition, perfect rationality, and no externalities. If these models accurately portrayed reality, the economy would be efficient and there would be no need for government intervention. The assumptions of these models, however, are unrealistic and it is difficult to reconcile the required macro-formulations with what is known about microeconomic behavior (without resorting to ad hoc assumptions about the nature of the stochastic shocks to preferences and technology). The inadequacies of these models are even greater for developing countries where information imperfections are more pervasive and more markets are missing or incomplete (e.g., insurance markets). Accordingly, economic research since the 1990s has focused on identifying the most important limitations of the standard competitive model, particularly those limitations that help to explain the nature of economic volatility.
Roy C. Smith and Ingo Walter
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780195171679
- eISBN:
- 9780199783618
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195171675.003.0001
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the nature, effects, and consequences of the bubble of 1995-2000. The 20th century experienced four exceptional stock market booms in the United States that have been called ...
More
This chapter examines the nature, effects, and consequences of the bubble of 1995-2000. The 20th century experienced four exceptional stock market booms in the United States that have been called “bubbles”. Economist Richard Sylla describes these periods (1905, 1928, 1958, 1998) as times when the 10-year moving averages of real rates of return on stocks reached peaks from which they rapidly descended (or crashed) a year to two later. Of these four bubbles, the ones that peaked in 1928 and 1998, leading to crashes in 1929 and 2000, respectively, were the ones of greatest significance. The 2000 crash involved more financial wreckage than earlier crashes. It was followed by scandals that were front-page stories for months, and public interest in the market collapse and its causes and consequences was intense. The causes of the 2000-2002 crash are analyzed.Less
This chapter examines the nature, effects, and consequences of the bubble of 1995-2000. The 20th century experienced four exceptional stock market booms in the United States that have been called “bubbles”. Economist Richard Sylla describes these periods (1905, 1928, 1958, 1998) as times when the 10-year moving averages of real rates of return on stocks reached peaks from which they rapidly descended (or crashed) a year to two later. Of these four bubbles, the ones that peaked in 1928 and 1998, leading to crashes in 1929 and 2000, respectively, were the ones of greatest significance. The 2000 crash involved more financial wreckage than earlier crashes. It was followed by scandals that were front-page stories for months, and public interest in the market collapse and its causes and consequences was intense. The causes of the 2000-2002 crash are analyzed.
Roy C. Smith and Ingo Walter
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780195171679
- eISBN:
- 9780199783618
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195171675.003.0002
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the fundamental effects related to the evolving dominance of capital markets. By the end of the 20th century, the proportion of all financial assets held by banks had declined ...
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This chapter examines the fundamental effects related to the evolving dominance of capital markets. By the end of the 20th century, the proportion of all financial assets held by banks had declined to approximately 30% from 45% in 1980, with the difference transferred to global financial markets that had developed to an extraordinary, completely unprecedented size with market capitalization of stocks and bonds exceeding $72 trillion in 2000. These markets contained powerful forces that could quickly move funds in large quantities around the world to jump into (or out of) a suddenly discovered investment opportunity. These forces were energized by enormous turnover volumes — the value of consolidated world stock trading in 2000 was more than $47 trillion, one and a half times its market capitalization. About half of this trading occurred outside the United States, in stock markets in Europe, Asia, and Latin America.Less
This chapter examines the fundamental effects related to the evolving dominance of capital markets. By the end of the 20th century, the proportion of all financial assets held by banks had declined to approximately 30% from 45% in 1980, with the difference transferred to global financial markets that had developed to an extraordinary, completely unprecedented size with market capitalization of stocks and bonds exceeding $72 trillion in 2000. These markets contained powerful forces that could quickly move funds in large quantities around the world to jump into (or out of) a suddenly discovered investment opportunity. These forces were energized by enormous turnover volumes — the value of consolidated world stock trading in 2000 was more than $47 trillion, one and a half times its market capitalization. About half of this trading occurred outside the United States, in stock markets in Europe, Asia, and Latin America.
Roderick Martin, Peter D. Casson, and Tahir M. Nisar
- Published in print:
- 2007
- Published Online:
- September 2007
- ISBN:
- 9780199202607
- eISBN:
- 9780191707896
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199202607.003.0008
- Subject:
- Business and Management, Finance, Accounting, and Banking
This chapter adopts a normative standpoint in examining both shareholder value and investor engagement. Shareholder value analyses exaggerate the weakness of internal control systems, overestimate ...
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This chapter adopts a normative standpoint in examining both shareholder value and investor engagement. Shareholder value analyses exaggerate the weakness of internal control systems, overestimate the efficiency of the capital market as a means of transferring resources from sectors of low value added to sectors of high value added, and attributes too much importance to the capital market and equity finance as a source of new investment. Shareholder value analyses neglect the risks incurred by other stakeholders in the corporation, including employees. Investor engagement to enhance shareholder value or to secure compliance with ‘best City practice’ is regarded as uncontroversial. However, engagement to achieve wider social values may distort corporate practice. The chapter concludes by arguing for greater openness in corporate governance and the representation of a wider range of interests, not for further entrenchment of shareholder interests.Less
This chapter adopts a normative standpoint in examining both shareholder value and investor engagement. Shareholder value analyses exaggerate the weakness of internal control systems, overestimate the efficiency of the capital market as a means of transferring resources from sectors of low value added to sectors of high value added, and attributes too much importance to the capital market and equity finance as a source of new investment. Shareholder value analyses neglect the risks incurred by other stakeholders in the corporation, including employees. Investor engagement to enhance shareholder value or to secure compliance with ‘best City practice’ is regarded as uncontroversial. However, engagement to achieve wider social values may distort corporate practice. The chapter concludes by arguing for greater openness in corporate governance and the representation of a wider range of interests, not for further entrenchment of shareholder interests.
Alan D. Morrison and William J. Wilhelm, Jr.
- Published in print:
- 2007
- Published Online:
- May 2007
- ISBN:
- 9780199296576
- eISBN:
- 9780191712036
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199296576.001.0001
- Subject:
- Economics and Finance, Financial Economics
This book provides an economic rationale for the dominant role of investment banks in the capital markets, and uses it to explain both the historical evolution of and recent changes to the investment ...
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This book provides an economic rationale for the dominant role of investment banks in the capital markets, and uses it to explain both the historical evolution of and recent changes to the investment banking industry. The book points to the importance of well-defined property rights and properly-functioning property rights institutions in supporting the devolved decision making that drives capitalist economies. A critical decision in capitalist economies is the investment decision that allocates resources to new ventures. But this decision relies upon price-relevant information over which it is impossible to establish property rights; as a result, it is very hard to coordinate the exchange of this information. The book argues that investment banks help to resolve this problem by managing ‘information marketplaces’ within which extra-legal institutions support the production and dissemination of information that is important to investors. Reputations and relationships are more important in fulfilling this role than financial capital. The theory is substantiated with reference to the industry's evolution during the last three centuries. It shows how investment banking networks were formed, and identifies the informal contracts they supported. This historical development points to tensions between banks and the regulatory impulses of the State, thus providing some explanation for periodic large-scale State intervention in the operation of capital markets. The book's theory also provides a technological explanation for the massive restructuring of the capital markets in recent decades, which can be used to think about the likely future direction of the investment banking industry.Less
This book provides an economic rationale for the dominant role of investment banks in the capital markets, and uses it to explain both the historical evolution of and recent changes to the investment banking industry. The book points to the importance of well-defined property rights and properly-functioning property rights institutions in supporting the devolved decision making that drives capitalist economies. A critical decision in capitalist economies is the investment decision that allocates resources to new ventures. But this decision relies upon price-relevant information over which it is impossible to establish property rights; as a result, it is very hard to coordinate the exchange of this information. The book argues that investment banks help to resolve this problem by managing ‘information marketplaces’ within which extra-legal institutions support the production and dissemination of information that is important to investors. Reputations and relationships are more important in fulfilling this role than financial capital. The theory is substantiated with reference to the industry's evolution during the last three centuries. It shows how investment banking networks were formed, and identifies the informal contracts they supported. This historical development points to tensions between banks and the regulatory impulses of the State, thus providing some explanation for periodic large-scale State intervention in the operation of capital markets. The book's theory also provides a technological explanation for the massive restructuring of the capital markets in recent decades, which can be used to think about the likely future direction of the investment banking industry.
Roy C. Smith, Ingo Walter, and Gayle Delong
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780195335934
- eISBN:
- 9780199932146
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195335934.003.0005
- Subject:
- Economics and Finance, Economic Systems
This chapter discusses the extraordinary growth in international stocks. Issuers tap international stock markets to increase the pool of available funds, lower costs of raising capital, expand their ...
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This chapter discusses the extraordinary growth in international stocks. Issuers tap international stock markets to increase the pool of available funds, lower costs of raising capital, expand their investor base, and/or avoid domestic regulatory complications. Investors move to international markets to improve portfolio performance and to lower risks. Both groups' interests have been furthered by the erosion of regulatory barriers, including exchange controls, limits on ownership, limits on participation in domestic markets, and obstructive listing and trading practices. Capital market integration is leading to a single world equity market. Investment houses stand prepared to make markets twenty-four hours a day in selected stocks. The infrastructure for such activity is being consolidated, sharpened, and challenged by new opportunities and competitive pressures.Less
This chapter discusses the extraordinary growth in international stocks. Issuers tap international stock markets to increase the pool of available funds, lower costs of raising capital, expand their investor base, and/or avoid domestic regulatory complications. Investors move to international markets to improve portfolio performance and to lower risks. Both groups' interests have been furthered by the erosion of regulatory barriers, including exchange controls, limits on ownership, limits on participation in domestic markets, and obstructive listing and trading practices. Capital market integration is leading to a single world equity market. Investment houses stand prepared to make markets twenty-four hours a day in selected stocks. The infrastructure for such activity is being consolidated, sharpened, and challenged by new opportunities and competitive pressures.
E. Philip Davis
- Published in print:
- 1998
- Published Online:
- March 2012
- ISBN:
- 9780198293040
- eISBN:
- 9780191684944
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198293040.003.0008
- Subject:
- Economics and Finance, Financial Economics, Public and Welfare
In Chapter 1, it was suggested that an overriding effect on corporate finance as well as the evolution of capital markets may be brought about by the development of pension funds. This chapter thus ...
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In Chapter 1, it was suggested that an overriding effect on corporate finance as well as the evolution of capital markets may be brought about by the development of pension funds. This chapter thus provides a more detailed discussion about how pension funds affect the demand for innovation, capital-market instruments, market structure, volatility, and the development of capital markets on the whole. As it avoids adopting Anglo-Saxon stereotypes over all markets, the chapter shows that the pension funds have effects on the development of capital markets that differ from country to country. While it still has to consider common trends, the analysis may converge on Anglo-Saxon modes of market behaviour and financing over the long term.Less
In Chapter 1, it was suggested that an overriding effect on corporate finance as well as the evolution of capital markets may be brought about by the development of pension funds. This chapter thus provides a more detailed discussion about how pension funds affect the demand for innovation, capital-market instruments, market structure, volatility, and the development of capital markets on the whole. As it avoids adopting Anglo-Saxon stereotypes over all markets, the chapter shows that the pension funds have effects on the development of capital markets that differ from country to country. While it still has to consider common trends, the analysis may converge on Anglo-Saxon modes of market behaviour and financing over the long term.
George J. Benston, Michael Bromwich, Robert E. Litan, and Alfred Wagenhofer
- Published in print:
- 2006
- Published Online:
- February 2006
- ISBN:
- 9780195305838
- eISBN:
- 9780199783342
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195305833.001.0001
- Subject:
- Economics and Finance, Financial Economics
This book provides readers with reasonably concise descriptions of the state of global markets, the benefits and limitations of financial accounting and accounting/auditing standards, and the ...
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This book provides readers with reasonably concise descriptions of the state of global markets, the benefits and limitations of financial accounting and accounting/auditing standards, and the development, status, and current policy issues of corporate financial reporting in major countries and the European Union. The globalization of financial markets has contributed to a growing consensus that national financial reporting standards should give way to a single, harmonized set of global reporting standards. This book takes a more practical approach and reaches a different conclusion: that global standards are unlikely to be achieved, and in any event, are not likely to remain unified in the face of continued changes in markets and financial practices. National accounting standards are likely to continue to be relevant for the foreseeable future, and for that reason, the book discusses the national systems and their origins in some detail. The authors also consider a range of other substantive reporting issues, notably the debate over the issue of “fair value” measurement of assets and liabilities, which the authors reject in favor of a system that marks to market only those assets with deep traded markets, coupled with additional disclosures, where relevant.Less
This book provides readers with reasonably concise descriptions of the state of global markets, the benefits and limitations of financial accounting and accounting/auditing standards, and the development, status, and current policy issues of corporate financial reporting in major countries and the European Union. The globalization of financial markets has contributed to a growing consensus that national financial reporting standards should give way to a single, harmonized set of global reporting standards. This book takes a more practical approach and reaches a different conclusion: that global standards are unlikely to be achieved, and in any event, are not likely to remain unified in the face of continued changes in markets and financial practices. National accounting standards are likely to continue to be relevant for the foreseeable future, and for that reason, the book discusses the national systems and their origins in some detail. The authors also consider a range of other substantive reporting issues, notably the debate over the issue of “fair value” measurement of assets and liabilities, which the authors reject in favor of a system that marks to market only those assets with deep traded markets, coupled with additional disclosures, where relevant.
Olivier Feiertag
- Published in print:
- 2005
- Published Online:
- September 2007
- ISBN:
- 9780199269495
- eISBN:
- 9780191710162
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199269495.003.0011
- Subject:
- Business and Management, Finance, Accounting, and Banking
This chapter examines the ability of the Paris Bourse from the 1950s onwards to maintain a marginal but nevertheless persistent level, the return of the franc to external convertibility, and ...
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This chapter examines the ability of the Paris Bourse from the 1950s onwards to maintain a marginal but nevertheless persistent level, the return of the franc to external convertibility, and liberalization of the financial market in the second half of the 1980s. By considering the ebb and flow of the dynamics of the international markets in their effect on capital markets, it is possible to throw some light on the changes within the whole of the French financial system.Less
This chapter examines the ability of the Paris Bourse from the 1950s onwards to maintain a marginal but nevertheless persistent level, the return of the franc to external convertibility, and liberalization of the financial market in the second half of the 1980s. By considering the ebb and flow of the dynamics of the international markets in their effect on capital markets, it is possible to throw some light on the changes within the whole of the French financial system.
Joseph E. Stiglitz
- Published in print:
- 2008
- Published Online:
- May 2008
- ISBN:
- 9780199230587
- eISBN:
- 9780191710896
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199230587.003.0003
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Capital market liberalization, especially the rules governing short-term cross-border capital flows, is one of the most controversial aspects of globalization. The IMF and the US Treasury have tried ...
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Capital market liberalization, especially the rules governing short-term cross-border capital flows, is one of the most controversial aspects of globalization. The IMF and the US Treasury have tried to push capital market liberalization around the world, encountering enormous opposition from developing countries as well as from economists who are less enamored with the tenets of market fundamentalism. Taking as its point of departure a recent IMF paper this chapter explains why capital market liberalization has so often led not to economic growth but to increased economic instability, and provides insights into how the IMF could have gone so wrong in its advocacy of capital market liberalization. It recommends that in the future, the IMF should rely more on evidence and less on ideology in developing its policy agenda. It should stop pressuring countries to liberalize and instead address underlying CM failures, working with countries to design interventions that stabilize capital flows and shift risks to developed countries and international financial institutions.Less
Capital market liberalization, especially the rules governing short-term cross-border capital flows, is one of the most controversial aspects of globalization. The IMF and the US Treasury have tried to push capital market liberalization around the world, encountering enormous opposition from developing countries as well as from economists who are less enamored with the tenets of market fundamentalism. Taking as its point of departure a recent IMF paper this chapter explains why capital market liberalization has so often led not to economic growth but to increased economic instability, and provides insights into how the IMF could have gone so wrong in its advocacy of capital market liberalization. It recommends that in the future, the IMF should rely more on evidence and less on ideology in developing its policy agenda. It should stop pressuring countries to liberalize and instead address underlying CM failures, working with countries to design interventions that stabilize capital flows and shift risks to developed countries and international financial institutions.
E. Philip Davis
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198233312
- eISBN:
- 9780191596124
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198233310.003.0007
- Subject:
- Economics and Finance, Financial Economics
In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of ...
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In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of December 1973, the Herstatt crisis of June 1974, the advent of the LDC Debt Crisis in August 1982, the crisis in the FRN market of December 1986, the equity market crash of October 1987, and the US thrifts crises of the 1980s. Background on wholesale financial markets—in which most of the crises occurred—is provided in Sect. 1. In Sect. 2, the events of the periods of financial disorder are outlined. Three crises took place largely in international capital markets; one linked international and domestic and the other two were purely in domestic financial markets. Virtually all occurred in unregulated or liberalized financial markets. Section 3 sets these crises in the context of the long‐run behaviour of prices and quantities in the financial markets with a graphical illustration of the 1966–90 period. The behaviour of key economic indicators as well as market prices and quantities surrounding these events is examined in more detail in Sect. 4. These sections permit a qualitative evaluation in Sect. 5 of the theories of crisis; the results also cast light on the behaviour of financial markets under stress and give indications of appropriate policy responses.Less
In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of December 1973, the Herstatt crisis of June 1974, the advent of the LDC Debt Crisis in August 1982, the crisis in the FRN market of December 1986, the equity market crash of October 1987, and the US thrifts crises of the 1980s. Background on wholesale financial markets—in which most of the crises occurred—is provided in Sect. 1. In Sect. 2, the events of the periods of financial disorder are outlined. Three crises took place largely in international capital markets; one linked international and domestic and the other two were purely in domestic financial markets. Virtually all occurred in unregulated or liberalized financial markets. Section 3 sets these crises in the context of the long‐run behaviour of prices and quantities in the financial markets with a graphical illustration of the 1966–90 period. The behaviour of key economic indicators as well as market prices and quantities surrounding these events is examined in more detail in Sect. 4. These sections permit a qualitative evaluation in Sect. 5 of the theories of crisis; the results also cast light on the behaviour of financial markets under stress and give indications of appropriate policy responses.
Joseph E. Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199288144
- eISBN:
- 9780191603884
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199288143.003.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter introduces the book and lays out the key questions of macroeconomic policy. Economists differ greatly in their views and policy prescriptions. All economic policies, though, have ...
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This chapter introduces the book and lays out the key questions of macroeconomic policy. Economists differ greatly in their views and policy prescriptions. All economic policies, though, have trade-offs. Policy choices come with risks, and the risks involve different beneficiaries and victims. Political processes play a key role in macroeconomic policy just as they do in most arenas of economic decision-making. If there were no alternative policies, or if one approach were best for everyone, then we could leave the design of economic policy to domestic and international technocrats and bureaucrats. But there are always alternatives and trade-offs so choices are political in nature and cannot be left to technocrats.Less
This chapter introduces the book and lays out the key questions of macroeconomic policy. Economists differ greatly in their views and policy prescriptions. All economic policies, though, have trade-offs. Policy choices come with risks, and the risks involve different beneficiaries and victims. Political processes play a key role in macroeconomic policy just as they do in most arenas of economic decision-making. If there were no alternative policies, or if one approach were best for everyone, then we could leave the design of economic policy to domestic and international technocrats and bureaucrats. But there are always alternatives and trade-offs so choices are political in nature and cannot be left to technocrats.
Ranald C. Michie
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199242559
- eISBN:
- 9780191596643
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199242550.003.0004
- Subject:
- Economics and Finance, Economic History, Financial Economics
The first section of this chapter looks at the internationalization of the London securities market over the period from 1850 to 1914. This was influenced both by transferable securities becoming ...
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The first section of this chapter looks at the internationalization of the London securities market over the period from 1850 to 1914. This was influenced both by transferable securities becoming commonplace for governments and businesses around the world, and by the transformation of communications with the development of the telegraph and then the telephone. These developments necessitated increased capacity to cope with the growing volume of securities traded, which included expansion of the trading floor, increasing membership, and the attraction of new people into the profession of stockbroking. The second section looks at the accompanying changes in the organizational and physical structure of the London Stock Exchange. The remaining sections look specifically at the expansion of membership, relationships and rivalry within the Stock Exchange, and the relationship of the Exchange to the money and capital (securities) markets.Less
The first section of this chapter looks at the internationalization of the London securities market over the period from 1850 to 1914. This was influenced both by transferable securities becoming commonplace for governments and businesses around the world, and by the transformation of communications with the development of the telegraph and then the telephone. These developments necessitated increased capacity to cope with the growing volume of securities traded, which included expansion of the trading floor, increasing membership, and the attraction of new people into the profession of stockbroking. The second section looks at the accompanying changes in the organizational and physical structure of the London Stock Exchange. The remaining sections look specifically at the expansion of membership, relationships and rivalry within the Stock Exchange, and the relationship of the Exchange to the money and capital (securities) markets.
Philip L. Cottrell
- Published in print:
- 2005
- Published Online:
- September 2007
- ISBN:
- 9780199269495
- eISBN:
- 9780191710162
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199269495.003.0008
- Subject:
- Business and Management, Finance, Accounting, and Banking
This chapter discusses the effects of the First World War on the City, reviewing opportunities for much greater dealings in foreign exchange and the ‘bill on London's rapid revival’. The war not only ...
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This chapter discusses the effects of the First World War on the City, reviewing opportunities for much greater dealings in foreign exchange and the ‘bill on London's rapid revival’. The war not only resulted in sterling becoming a floating currency but also caused the London capital market to be regulated, which is analysed in this chapter. The chapter then focuses upon how the 1931 liquidity crisis severely affected the City through leading houses' substantial commitments to Central and Eastern Europe. It also reviews the City's ‘long winter’ caused by, first, the world economy's prostrate state, and then the Second World War. In addition, the discussion in this chapter focuses on the recovery of the City's international role during the 1950s and the beginnings of an entirely new foundation for its global importance with the emergence of the Euromarkets. Some reflections on the City's experience during the first half of the 20th century are offered at the end of the chapter.Less
This chapter discusses the effects of the First World War on the City, reviewing opportunities for much greater dealings in foreign exchange and the ‘bill on London's rapid revival’. The war not only resulted in sterling becoming a floating currency but also caused the London capital market to be regulated, which is analysed in this chapter. The chapter then focuses upon how the 1931 liquidity crisis severely affected the City through leading houses' substantial commitments to Central and Eastern Europe. It also reviews the City's ‘long winter’ caused by, first, the world economy's prostrate state, and then the Second World War. In addition, the discussion in this chapter focuses on the recovery of the City's international role during the 1950s and the beginnings of an entirely new foundation for its global importance with the emergence of the Euromarkets. Some reflections on the City's experience during the first half of the 20th century are offered at the end of the chapter.
