With the advent of increased capital mobility, financial factors have become of key importance for the processes of stabilization and growth in developing developed, and transforming economies. The size of international capital movements and the financial intermediation industry has become so large that these factors could become the dominant impulses for individual economies and the global economy in the 1990s and beyond. This book collects essays by well-known analysts in international economics and finance who treat these issues from relatively new perspectives. They focus on (i) the role of credit in the propagation mechanism of monetary policy; (ii) effects of monetary policy on the likelihood that a given economy will become a banking centre; (iii) the implications of increased capital mobility for migration flows; (iv) the role of exchange rate bands in the transition from high to low inflation; and (v) the interaction between financial innovations and inflation.
• Rigorous analysis of financial factors on economic stabilization and growth • Offers a balanced blend of theoretical and empirical analyses • Examines one of the most relevant topics of today's international economy
Part I. Introduction: Mario I. Blejer, Zvi Eckstein, Zvi Hercowitz and Leonardo Leiderman; Part II. Transmission of Credit Policy: 1. The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence Mark Gertler and Simon Gilchrist; 2. Identification and the effects of monetary policy shocks Lawrence J. Christiano, Martin Eichenbaum and Charles Evans; 3. Credit market imperfections and low-output equilibria in economies in transition Guillermo A. Calvo and Fabrizio Coricelli; Part III. International Financial Factors: 4. Transparency and the evolution of exchange rate flexibility in the aftermath of disinflation Alex Cukierman, Miguel Kiguel and Leonardo Leiderman; 5. Cross-border banking Jonathon Eaton; 6. Immigration and growth under imperfect capital mobility: the case of Israel Zvi Hercowitz, Nirit Kantor and Leora Meridor; Part IV. Financial Innovation and Growth: 7. Interpreting monetary stabilization in a growth model with credit goods production Rao Aiyagari and Zvi Eckstein; 8. The macroeconomic effects of financial innovation: the case of Israel Rafael Melnik and Eran Yashiv.