Contagion And Volatility With Imperfect Credit Markets

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Contagion and Volatility with Imperfect Credit Markets

Mr.Joshua Aizenman,Pierre-Richard Agénor
Contagion and Volatility with Imperfect Credit Markets Book PDF

Author : Mr.Joshua Aizenman,Pierre-Richard Agénor
Publisher : International Monetary Fund
Page : 34 pages
File Size : 41,9 Mb
Release : 1997-10-01
Category : Business & Economics
ISBN : 9781451935967

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Contagion and Volatility with Imperfect Credit Markets by Mr.Joshua Aizenman,Pierre-Richard Agénor Pdf

This paper interprets contagion effects as an increase in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks. Higher volatility of producers’ productivity shocks increases both domestic and foreign financial spreads and the producers’ cost of capital, resulting in lower employment and higher incidence of default. Welfare effects are nonlinearly related to the degree of international financial integration.

Contagion and Volatility with Imperfect Credit Markets

Pierre-Richard Agenor
Contagion and Volatility with Imperfect Credit Markets Book PDF

Author : Pierre-Richard Agenor
Publisher : Unknown
Page : 33 pages
File Size : 51,5 Mb
Release : 2006
Category : Electronic
ISBN : OCLC:1291214596

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Contagion and Volatility with Imperfect Credit Markets by Pierre-Richard Agenor Pdf

This paper interprets contagion effects as an increase in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks. Higher volatility of producers` productivity shocks increases both domestic and foreign financial spreads and the producers` cost of capital, resulting in lower employment and higher incidence of default. Welfare effects are nonlinearly related to the degree of international financial integration.

Contagion and Volatility with Imperfect Credit Markets

Pierre-Richard Agénor,Joshua Aizenman
Contagion and Volatility with Imperfect Credit Markets Book PDF

Author : Pierre-Richard Agénor,Joshua Aizenman
Publisher : Unknown
Page : 50 pages
File Size : 55,9 Mb
Release : 1997
Category : Bank deposits
ISBN : UCSD:31822023984735

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Contagion and Volatility with Imperfect Credit Markets by Pierre-Richard Agénor,Joshua Aizenman Pdf

This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks which possess comparative advantage in monitoring the behavior of domestic agents. Financial intermediation spreads are shown to be determined by a markup that compensates for the expected cost of contract enforcement and state verification and for the expected revenue lost in adverse states of nature. Higher volatility of producers' productivity shocks increases both financial spreads and the producers' cost of capital, resulting in lower employment and higher incidence of default. The welfare effects of volatility are non-linear. Higher volatility does not impose any welfare cost for countries characterized by relatively low volatility and efficient financial intermediation. The adverse welfare effects are large (small) for countries that are at the threshold of full integration with international capital markets (close to financial autarky), that is, countries characterized by a relatively low (high) probability of default.

IMF Staff papers

International Monetary Fund. Research Dept.
IMF Staff papers Book PDF

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 203 pages
File Size : 54,9 Mb
Release : 1998-01-01
Category : Business & Economics
ISBN : 9781455277445

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IMF Staff papers by International Monetary Fund. Research Dept. Pdf

This paper analyzes contagion and volatility with imperfect credit markets. The paper interprets contagion effects as an increase in the volatility of shocks impinging on the economy. The implications of this approach are analyzed in a model in which domestic banks borrow at a premium on world capital markets, and domestic producers borrow at a premium from domestic banks. Financial spreads depend on a markup that compensates lenders, in particular, for the expected cost of contract enforcement. Higher volatility increases financial spreads and the producers’ cost of capital.

International Financial Contagion

Stijn Claessens,Kirsten Forbes
International Financial Contagion Book PDF

Author : Stijn Claessens,Kirsten Forbes
Publisher : Springer Science & Business Media
Page : 461 pages
File Size : 49,7 Mb
Release : 2013-04-17
Category : Business & Economics
ISBN : 9781475733143

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International Financial Contagion by Stijn Claessens,Kirsten Forbes Pdf

No sooner had the Asian crisis broken out in 1997 than the witch-hunt started. With great indignation every Asian economy pointed fingers. They were innocent bystanders. The fundamental reason for the crisis was this or that - most prominently contagion - but also the decline in exports of the new commodities (high-tech goods), the steep rise of the dollar, speculators, etc. The prominent question, of course, is whether contagion could really have been the key factor and, if so, what are the channels and mechanisms through which it operated in such a powerful manner. The question is obvious because until 1997, Asia's economies were generally believed to be immensely successful, stable and well managed. This question is of great importance not only in understanding just what happened, but also in shaping policies. In a world of pure contagion, i.e. when innocent bystanders are caught up and trampled by events not of their making and when consequences go far beyond ordinary international shocks, countries will need to look for better protective policies in the future. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy measures to help avoid, or at least contain, financial crises.

Contagion, Bank Lending Spreads, and Output Fluctuations

Pierre-Richard Agénor,Joshua Aizenman,Alexander W. Hoffmaister
Contagion Bank Lending Spreads and Output Fluctuations Book PDF

Author : Pierre-Richard Agénor,Joshua Aizenman,Alexander W. Hoffmaister
Publisher : World Bank Publications
Page : 36 pages
File Size : 46,8 Mb
Release : 1999
Category : Argentina
ISBN : 8210379456XXX

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Contagion, Bank Lending Spreads, and Output Fluctuations by Pierre-Richard Agénor,Joshua Aizenman,Alexander W. Hoffmaister Pdf

A positive historical shock to external spreads can lead to an increase in domestic spreads and a reduction in the cyclical component of output. Shocks to external spreads immediately after the Mexican peso crisis had a sizable effect on movements in output and domestic interest rate spreads in Argentina.

Portfolio Diversification, Leverage, and Financial Contagion

Mr.Garry J. Schinasi,T. Todd Smith
Portfolio Diversification Leverage and Financial Contagion Book PDF

Author : Mr.Garry J. Schinasi,T. Todd Smith
Publisher : International Monetary Fund
Page : 39 pages
File Size : 54,6 Mb
Release : 1999-10-01
Category : Business & Economics
ISBN : 9781451855791

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Portfolio Diversification, Leverage, and Financial Contagion by Mr.Garry J. Schinasi,T. Todd Smith Pdf

Models of “contagion” rely on market imperfections to explain why adverse shocks in one asset market might be associated with asset sales in many unrelated markets. This paper demonstrates that contagion can be explained with basic portfolio theory without recourse to market imperfections. It also demonstrates that “Value-at-Risk” portfolio management rules do not have significantly different consequences for portfolio rebalancing and contagion than other rules. The paper’s main conclusion is that portfolio diversification and leverage may be sufficient to explain why investors would find it optimal to sell many higher-risk assets when a shock to one asset occurs.

Financial Market Contagion in the Asian Crisis

Mr.Taimur Baig,Mr.Ilan Goldfajn
Financial Market Contagion in the Asian Crisis Book PDF

Author : Mr.Taimur Baig,Mr.Ilan Goldfajn
Publisher : International Monetary Fund
Page : 60 pages
File Size : 51,5 Mb
Release : 1998-11-01
Category : Business & Economics
ISBN : 9781451857283

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Financial Market Contagion in the Asian Crisis by Mr.Taimur Baig,Mr.Ilan Goldfajn Pdf

This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Cross-country correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. A set of dummy variables using daily news is constructed to capture the impact of own-country and cross-border news on the markets. After controlling for own-country news and other fundamentals, the paper shows evidence of cross-border contagion in the currency and equity markets.

Development Macroeconomics

Pierre-Richard Agénor,Peter J. Montiel
Development Macroeconomics Book PDF

Author : Pierre-Richard Agénor,Peter J. Montiel
Publisher : Princeton University Press
Page : 792 pages
File Size : 41,9 Mb
Release : 2015-06-23
Category : Business & Economics
ISBN : 9781400866267

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Development Macroeconomics by Pierre-Richard Agénor,Peter J. Montiel Pdf

The global financial crisis triggered severe shocks for developing countries, whose embrace of greater commercial and financial openness has increased their exposure to external shocks, both real and financial. This new edition of Development Macroeconomics has been fully revised to address the more open and less stable environment in which developing countries operate today. Describing the latest advances in this rapidly changing field, the book features expanded coverage of public debt and the management of capital inflows as well as new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, currency unions, and the choice of an exchange-rate regime. A new chapter on dynamic stochastic general equilibrium (DSGE) models with financial frictions has been added to reflect how the financial crisis has reshaped our thinking on the role of such frictions in generating and propagating real and financial shocks. The book also discusses the role of macroprudential regulation, both independently and through its interactions with monetary policy, in preserving financial and macroeconomic stability. Now in its fourth edition, Development Macroeconomics remains the definitive textbook on the macroeconomics of developing countries. The most authoritative book on the subject—now fully revised and expanded Features new material on fiscal discipline, monetary policy regimes, currency, banking and sovereign debt crises, and much more Comes with online supplements on informal financial markets, stabilization programs, the solution of DSGE models with financial frictions, and exchange rate crises

IMF Staff Papers, Volume 47, No. 2

International Monetary Fund. Research Dept.
IMF Staff Papers Volume 47 No 2 Book PDF

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 128 pages
File Size : 52,5 Mb
Release : 2000-01-01
Category : Business & Economics
ISBN : 9781451974232

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IMF Staff Papers, Volume 47, No. 2 by International Monetary Fund. Research Dept. Pdf

This paper analyzes portfolio diversification, leverage, and financial contagion. It studies the extent to which basic principles of portfolio diversification explain “contagious selling” of financial assets when there are purely local shocks. The paper demonstrates that the elementary portfolio theory offers key insights into “contagion.” Most important, portfolio diversification and leverage are sufficient to explain why an investor will find it optimal to significantly reduce all risky asset positions when an adverse shock impacts just one asset.

Contagion

Mr.Paul R. Masson
Contagion Book PDF

Author : Mr.Paul R. Masson
Publisher : International Monetary Fund
Page : 33 pages
File Size : 49,9 Mb
Release : 1998-09-01
Category : Business & Economics
ISBN : 9781451856224

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Contagion by Mr.Paul R. Masson Pdf

Several concepts of contagion are distinguished. It is argued that only models that admit of multiple equilibria are capable of producing true contagion. A simple balance of payments model is presented to illustrate that phenomenon, and some back-of-the-envelope calculations assess its relevance to the coincidence of emerging market crises in 1994–95 and in 1997.

IMF Staff papers, Volume 45 No. 2

International Monetary Fund. Research Dept.
IMF Staff papers Volume 45 No 2 Book PDF

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 204 pages
File Size : 53,7 Mb
Release : 1998-01-01
Category : Business & Economics
ISBN : 9781451974164

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IMF Staff papers, Volume 45 No. 2 by International Monetary Fund. Research Dept. Pdf

This paper analyzes contagion and volatility with imperfect credit markets. The paper interprets contagion effects as an increase in the volatility of shocks impinging on the economy. The implications of this approach are analyzed in a model in which domestic banks borrow at a premium on world capital markets, and domestic producers borrow at a premium from domestic banks. Financial spreads depend on a markup that compensates lenders, in particular, for the expected cost of contract enforcement. Higher volatility increases financial spreads and the producers’ cost of capital.

The Value of Money

Catherine Cowley
The Value of Money Book PDF

Author : Catherine Cowley
Publisher : A&C Black
Page : 230 pages
File Size : 48,8 Mb
Release : 2006-06-02
Category : Religion
ISBN : 0567030903

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The Value of Money by Catherine Cowley Pdf

Offers an ethical examination of global finance which is both theologically and economically literate. This book also examines the effect of money on our understanding of freedom, of the market itself and of the ethical, issues arising from this, for individuals, the sector and for society as a whole.

Volatility and the Welfare Costs of Financial Market Integration

Pierre-Richard Agénor,Joshua Aizenman
Volatility and the Welfare Costs of Financial Market Integration Book PDF

Author : Pierre-Richard Agénor,Joshua Aizenman
Publisher : World Bank Publications
Page : 46 pages
File Size : 49,6 Mb
Release : 2024-07-03
Category : Electronic
ISBN : 8210379456XXX

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Volatility and the Welfare Costs of Financial Market Integration by Pierre-Richard Agénor,Joshua Aizenman Pdf

This paper examines the effect of volatility on the costs and benefits of financial market integration. The basic framework combines the costly state verification model and the contract enforceability approach. The welfare effects of financial market integration are assessed by comparing welfare under financial autarky and financial openness -- under which foreign banks, characterized by lower costs of intermediation and a lower markup rate, have free access to domestic capital markets. The analysis shows that financial integration may be welfare reducing if world interest rates under openness are highly volatile. The basic framework is then extended to consider the case of an upward-sloping domestic supply curve of funds and congestion externalities. It is shown, in particular, that opening the economy to unrestricted inflows of capital may magnify the welfare cost of existing distortions, such as congestion externalities or deposit insurance.

Financial Crises in Emerging Markets

Reuven Glick,Ramon Moreno,Mark Spiegel,Mark M. Spiegel
Financial Crises in Emerging Markets Book PDF

Author : Reuven Glick,Ramon Moreno,Mark Spiegel,Mark M. Spiegel
Publisher : Cambridge University Press
Page : 494 pages
File Size : 46,7 Mb
Release : 2001-04-23
Category : Business & Economics
ISBN : 052180020X

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Financial Crises in Emerging Markets by Reuven Glick,Ramon Moreno,Mark Spiegel,Mark M. Spiegel Pdf

The essays in this volume analyze causes of financial crises in emerging markets and different policy responses.