Financial (unofficial) dollarization is widely seen as a critical source of financial fragility in both developing and emerging economies. This volume provides a rigorous and balanced perspective on the causes and implications of dollarization, and the basic policies and options to deal with it: the adaptation of the monetary and prudential frameworks, the development of local-currency substitutes, and the scope for limiting dollarization through administrative restrictions.

The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices. The Black Scholes framework is introduced and by underlining its shortcomings, an alternative approach is presented that has emerged over the past ten years of academic research, an approach that is much more grounded on a realistic statistical analysis of data rather than on ad hoc tractable continuous time option pricing models. The reader then learns what it takes to understand and implement these option pricing models based on time series analysis in a self-contained way. The discussion covers modeling choices available to the quantitative analyst, as well as the tools to decide upon a particular model based on the historical datasets of financial returns. The reader is then guided into numerical deduction of option prices from these models and illustrations with real examples are used to reflect the accuracy of the approach using datasets of options on equity indices.

Fiscal Policy and Interest Rates in the European Union is a comprehensive study concerned with the potential effects of fiscal policy on financial markets in the European Union. It takes into account the gradual liberalization of capital movements throughout Western Europe and the institutional framework of the European monetary system. Klaas Knot takes a fresh approach to the impact of budget deficits on interest rates, especially in relation to international financial integration, and concludes that the increases in European budget deficits since the early 1970s have raised interest rates in the long term throughout the Union. In conclusion he argues that balanced budget deficits are necessary to maintain low interest rates. This important new book will be of interest to students, academics and policymakers concerned with monetary and public economics.

Little attention has been paid to the role of the European economies, and notably of the euro area, in the current global imbalance of international payments and growth rates, leading to somewhat simplistic views of Euroland contributing to limiting those imbalances and providing a template of economic policy for the twenty-first century. In addition, an influential view continues to stress the need for deeper and more comprehensive supply-side, structural reforms as a means to protect Euroland from potentially adverse global developments and play a positive role in the orderly correction of global imbalances. The contributions in this volume challenge this view and compellingly question, from a variety of angles, many popular beliefs about the road to virtues of Euroland, providing a comprehensive and fresh framework to address important questions for the future of the euro, from a critique of current macroeconomic policy institutions to proposals for both soft and tougher modifications of euro institutions, all pointing to a key question for the future of Europe: will the single currency project contribute to world economic dynamism or will it be driven by the vigour and vitality of others? Will Euroland act as global player or global drag?

Since I first published Management of Foreign Exchange Risk (Lexington Books, 1978), financial innovation-spurred, in part, by exploding volatility in currency prices-has revolutionized the theory and praxis of foreign exchange risk management. Old-fashioned forward contracts have surrendered market share to currency swaps and options as well as to their perpetually multiplying derivatives. Interestingly, forex derivatives now provide a low cost and highly efficient method of transferring risk from the firms that are exposed to risk but which would rather not be (i. e. , risk-hedgers) to those which are not exposed but which-in exchange for a fee-would assume some exposure to risk (i. e. , risk bearers). Perhaps more importantly, foreign exchange risk management, which was once a fairly mechanical task confmed to the international treasury function, is now permeating global strategic management. Indeed, since the demise of the Bretton Woods system of pegged exchange rates, the cost of forex hedging instruments has fallen so dramatically that firms can readily avail themselves of hedging products which can reduce unwanted risk, thereby potentially gaining a competitive advantage over rivals that do not. Management and Control of Foreign Exchange Risk has grown out of a fundamental revision of my earlier work published almost 20 years ago. In the process, my thinking about risk and its mathematics has greatly benefitted from my association with John Cozzolino and Charles Tapiero.

This contribution applies the cointegrated vector autoregressive (CVAR) model to analyze the long-run behavior and short-run dynamics of stock markets across five developed and three emerging economies. The main objective is to check whether liquidity conditions play an important role in stock market developments. As an innovation, liquidity conditions enter the analysis from three angles: in the form of a broad monetary aggregate, the interbank overnight rate and net capital flows, which represent the share of global liquidity that arrives in the respective country. A second aim is to understand whether central banks are able to influence the stock market.

This book explains the political background and describes the decision-making leading to European Monetary Union, as seen by a former central banker who participated in the process during more than two decades. Political rather than economic considerations were decisive in establishing EMU. French-German relations in particular form a thread that runs through the book, notably French efforts to replace German monetary domination by a form of decision-making France can influence. Thus, the issues involved are issues of power, though often presented in technical terms of economics.

'Elegantly analyses the key questions of cost, efficiency and risk. Mandatory reading for anyone with responsibilities in an RTGS system.' - Alfred Steinherr;The payment system is one of the mechanisms essential to the working of an exchange economy. Over the last decade, central banks have been determined to improve their payment systems to harmonise and reduce risk, and in Europe to anticipate their future interconnection in the TARGET system. This book provides the analytic framework for an informed policy debate on the implications for monetary policy.

This volume integrates financial theory, particularly financial contracting theory, into macroeconomics. The role of financial contracts in reducing the conflict between the various factors of production within the firm is described, particularly their influence upon the pricing, employment, production, and financing decisions of firms during various stages of the business cycle. Dr. Krainer takes an unconventional approach to the subject of financial institutions and markets: by applying financial theory to macroeconomic topics, he portrays a different view of how the financial system interacts with the economy.

The book assesses the most exciting experiment in modern economic history - the German currency union of 1990 - on three levels. Firstly the international consequences are analysed utilising different paradigms of monetary theory. These controversial results lead to a closer look at the relationship between monetary policy and production in Germany, and thirdly, the book concludes with a reconsideration of the old economic question, whether money matters, applied to the German case.

Taiwan, the Republic of China, has been striving to reform its financial system, and in the process, become a financial power, both regionally within the Pacific Rim of Asia, and, globally, given the rapidly increasing economic and financial significance of this area. In a unique book written from an interdisciplinary and well-balanced legal, financial and economics perspective that is both theoretical and practical, Semkow comprehensively analyzes and discusses the scope and direction financial and capital market reform has taken in Taiwan, and its implications for existing and newly emerging financial institutions in Taiwan and elsewhere.

Having introduced the problems underlying and the significance of Taiwanese financial reform, the author provides a thorough overview of the entire spectrum of existing and newly-emerging domestic and international financial institutions within Taiwan, and the various financial regulators, including the Ministry of Finance and the Central Bank of China, and the regulatory framework through which both financial institutions and regulators operate. The author examines in detail the various financial markets, including the financial, money, offshore banking, foreign exchange and securities (equity, debt and derivative) markets, and the major recent and imminent legislative and regulatory initiatives undertaken to reform these markets and elevate Taiwan's status as a regional, and by implication, a global financial center. This book will provide both foreign and Taiwanese financial, legal, business, and public policy and academic communities interested in Asian and Taiwanese business and finance an invaluable legal and financial guide to the rapidly emerging and increasing significance of Taiwanese banking and finance in this decade and into the next century.

Jean-Baptiste Say (1767-1832) was one of the first great economists to have laid down the foundations of economic science. Author of the famous Treatise on Political Economy in 1803, which was revised and re-edited on several occasions, he published numerous other works including a voluminous Complete Course in Practical Political Economy in 1828-9. He also taught political economy successively from 1815 until his death in three Parisian establishments: the Athenee, the Conservatory of Arts and Trades, and the College de France. The texts in which Say exposes his approach to political economy have not been available in the English language until now except for the fourth edition of the 'Preliminary Discourse' which serves as an introduction to the Treatise. This book presents a translation which renders his works accessible to the English speaking world. For the first time, English readers will be able to become directly immersed in Say's principal texts, where he develops his conception of political economy. Jean-Baptiste Say and Political Economy proposes a translation of a selection of eleven of Say's texts. The first three are versions of the 'Preliminary Discourse' from the Treatise's editions of 1803, 1814 and 1826 with the variations of the editions of 1817, 1819 and 1841. The following four texts are the opening discourses pronounced at the Conservatory in 1820 and 1828 and the College de France in 1831 and 1832. The eighth text is the 'General Considerations' which open the Complete Course in Practical Political Economy of 1828, with the variations of the 1840 re-edition. The final three texts are those Say devotes to 'the progress of political economy' in what is akin to a history of economic thought. This volume is of great importance to economic historians and people studying Jean-Baptiste Say, as well as those who are interested in economic theory and philosophy and political economy.

Standard macroeconomic monographs often discuss the mechanism of monetary transmission, usually ending by highlighting the complexities and uncertainties involved in this mechanism. Conversely, The Preparation of Monetary Policy takes these uncertainties as a starting point, analytically investigating their nature and spelling out their consequences for the monetary policy maker. The second innovative aspect of this book is its focus on policy preparation instead of well-covered topics such as monetary policy strategy, tactics, and implementation. Thirdly, a general, multi-model framework for preparing monetary policy is proposed, which is illustrated by case studies stressing the role of international economic linkages and of expectations. Written in a self-contained fashion, these case studies are of interest by themselves. The book is written for an audience that is interested in the art and science of monetary policy making, which includes central bankers, academics, and (graduate) students in the field of monetary economics, macroeconomics, international economics and finance.

The financial liberalization thesis emerged in the 1970s and has been of considerable importance ever since, not merely in terms of its theoretical influence but, perhaps more importantly, in terms of its impact on policy makers and policy debates. Although it has encountered increasing scepticism over the years, it nevertheless had a relatively early impact on development policy, which still continues unabated, through the work of the IMF and the World Bank. The latter two institutions, perhaps in their traditional role as promoters of what were claimed to be free market conditions, were keen to encourage financial liberalization policies as part of more general reforms or stabilization programmes. This book explores what we have learned from the vast experience of the theoretical and policy aspects of the financial liberalization.

This timely collection presents an authoritative overview of one of the three key currencies of the second half of the twentieth century, the German Mark. Charles A.E.Goodhart reflects on the future of the Euro against the background of the success story of the Deutsche Mark. Hans Tietmeyer reviews the 50 years lifetime of the German Mark, pointing out that the Bundesbank will continue to have a say within the European Central Bank. In particular he emphasizes the vital part of the Deutsche Mark as cornerstone of the so-called Social Market Economy in postwar Germany.

Throughout the ages money was a prerogative of national sovereignty. Currency management was the responsibility of governments.;After World War 2 Bretton Woods provided the framework for intergovernmental monetary cooperation until, in the early seventies, the banking community, using the Eurodollar as an international medium of exchange, forced governments to adopt a regime of floating rates.;The book describes how, in the 1950s, through an improbable chain of events, Soviet-owned banks established in Paris and London spawned the Eurodollar market, which has come to dominate world finance.;The Euromarket has given rise to a new breed of financiers and currency traders who radically changed the nature of international banking. The book relates the collision between sovereign states and stateless economic forces, the struggle for supremacy between the political authorities and the international financial community, their strategies and tactics, their strengths and weaknesses.

The classical ARMA models have limitations when applied to the field of financial and monetary economics. Financial time series present nonlinear dynamic characteristics and the ARCH models offer a more adaptive framework for this type of problem. This book surveys the recent work in this area from the perspective of statistical theory, financial models, and applications and will be of interest to theorists and practitioners. From the view point of statistical theory, ARCH models may be considered as specific nonlinear time series models which allow for an exhaustive study of the underlying dynamics. It is possible to reexamine a number of classical questions such as the random walk hypothesis, prediction interval building, presence of latent variables etc., and to test the validity of the previously studied results. There are two main categories of potential applications. One is testing several economic or financial theories concerning the stocks, bonds, and currencies markets, or studying the links between the short and long run. The second is related to the interventions of the banks on the markets, such as choice of optimal portfolios, hedging portfolios, values at risk, and the size and times of block trading.

On October 23 and 24, 1987, the Federal Reserve Bank of St. Louis hosted its twelfth annual economic policy conference, "The U.S. Trade Deficit: Causes, Consequences, and Cures." This book contains the papers and comments delivered at that conference. A sharp decline in the value of the dollar against major foreign cur rencies began in March 1985 and continued through December 1987. Despite this decline, the U.S. trade deficit experienced considerable growth during this time. Many consider the simultaneous occurrence of these two events over so long a period to be a problem requiring a policy response. The conference addresses this issue. Various papers discuss the cause of the trade deficit, the reason for its size and persistence, its relation ship with other macroeconomic variables, its impact on other industrialized countries, and various policy proposals aimed at reducing the deficit. Session I Peter Hooper and Catherine L. Mann provide an analytical setting for the conference with their "The U.S. External Deficit: Its Causes and Persistence." Their observation that the unprecedentedly large U. S. trade imbalance is striking in both its size and its persistence could well be the subtitle of each of the papers presented. The macroeconomic studies, which Hooper and Mann summarize in their review of the existing literature, uniformly conclude that the deficit has not responded to fundamental macroeconomic determinants-relative U.S. income growth and the dollar's exchange rate-in the way that earlier, smaller U.S."

The Evolution of Monetary Policy Strategies in Europe provides a comprehensive review of the advances in European monetary policy-making over the past decades. This book examines the considerations that determine a central bank's monetary strategy and explains how these considerations have featured in recent European monetary history. In so doing, it establishes what European monetary policy-makers have learned (or should have learned) and how they learned it. At the same time, Aerdt Houben maps out the rich monetary traditions that now flow together in the new-born Eurosystem and provides important insight into a prime influence on the system's decision-making, that is, the participating countries' past experiences. The book's distinctiveness lies in its sweeping coverage of policy developments in the individual central banks of the European Union, its penetrating analysis of the country-specific learning curves and its balanced assessment of the viability of alternative monetary policy strategies, including the strategy recently adopted by the Eurosystem. It combines theoretical insights with an in-depth empirical study of monetary policy design in Europe, highlighting the specific features that have contributed to policy success or failure. While the subject of monetary policy strategy (especially that of the Eurosystem) is currently very topical, the book's detailed information on how monetary policy has actually been implemented in each of the 15 European Union countries makes it a useful reference work with a long life-span.

This collection arises from the proceedings of a conference held in 2003 on the subject of the monetary theory of production. The contributors look at a number of issues including the tradition of the monetary theory of production; stocks and flows in the monetary circuit; unemployment; monetary distribution and monetary circuit and economic policy.

This book challenges the mainstream paradigm, which is based on the inter-temporal optimisation of welfare by individual agents. It introduces a new methodology for studying how it is institutions which create flows of income, expenditure and production together with stocks of assets (including money) and liabilities, thereby determining how whole economies evolve through time. Starting with extremely simple stock flow consistent (SFC) models, the text describes a succession of increasingly complex models. Solutions of these models are used to illustrate ways in which whole economies evolve when shocked in various ways. Readers will be able to download all the models and explore their properties for themselves. A major conclusion is that economies require management via fiscal and monetary policy if full employment without inflation is to be achieved.

Privatising firms and liberalizing their market environment generates in Eastern Europe a variety of problems, many of which are not common to the analogous attempts in industries countries. A first difference between the two experiences resides in establishing the value of the firm or of the assets that are being privatized. A second main difference concerns the lack of the record of market performance for the firm. The book explores these open questions through an overview of on-going and proposed processes in Section 1. In Section 2 theoretical foundations of privatization processes are proposed with respect to the financial market, industrial relations and foreign trade. A final key question is faced in Section 3: 'is there any alternative to privatization?'

The chapters in this book are based on papers prepared for a conference organized by the Federal Reserve Bank of San Francisco, held at the bank September 23-25, 1987, to review and compare monetary policy experiences of Pacific Basin countries during the past 15 years. The theme of the conference was conceived with two purposes in mind. First, there was (and still is) a great need to enhance knowledge on the workings of economies in the Pacific Basin, which has been the fastest growing region in the world economy during the past 30 years. While much has been written on Pacific Basin trade and economic growth, relatively few studies have been published on the conduct of monetary policy in these economies. Second, as we in the United States and others elsewhere have learned, rapid financial market changes over the last 15 years have led to considerable adjustment in the conduct of monetary policy. A comparative study of various national experiences can yield insights into the inter actions between monetary policy and financial market changes more than is obtainable by examining indi vidual national experiences separately."

Originally published between 1951 and 1987, the 8 volumes in this set: Provide a wide-ranging and critical review of both first and second generation theories of inflation (and the related problem of unemployment), including the classical approach to macroeconomics. Examine how inflation as a policy has come about in modern democracies, how it works, how to avoid it and at what cost Reassess the strengths and weaknesses of incomes policies Examine pay control policies in major Western economies and survey developments from 1945, explore the aims of pay policies and discusse the problems of implementation, comparing the different kinds of policies.