Finance and Volatility

doi:10.1017/CBO9780511510755.009

6 - Finance and Volatility

Published online by Cambridge University Press: 25 July 2009

Stijn Claessens

Edited by

Joshua Aizenman and

Brian Pinto

Show author details

Stijn Claessens: Affiliation:
Senior Adviser, Financial Sector Operations & Policy, The World Bank; Professor of International Finance Policy, University of Amsterdam
Joshua Aizenman: Affiliation:
University of California, Santa Cruz
Brian Pinto: Affiliation:
The World Bank

Book contents

Get access

Summary

ABSTRACT: Risk sharing is an important function of any financial system, although there are natural limits to the degree of risk sharing across individuals, corporations, and countries. How effective a financial system is in providing risk diversification can depend on its capitalization and its institutional development, including the quality of its regulation and supervision. A financial system will typically not provide full risk insurance, and may even propagate economic variability or create risks of its own. Before or during a crisis, financial markets and institutions can play a large role in causing or amplifying financial crises because of balance sheet effects and contagion, among others. Following a crisis, the state of the financial sector can impede the efficacy of restructuring policies and the ability to resume growth. This study reviews the literature on these issues and highlights the areas where knowledge is still limited.

CONCEPTS AND DEFINITIONS

Even though the financial sector has long been regarded as a key part of any economy, the importance of its links to economic performance is only coming to be fully appreciated and analyzed in the last decade or so. This statement is even more true of the relationship between finance and volatility. The purpose of this study is to present recent analytical thinking and empirical evidence regarding these topics to practitioners. The chapter opens with the basic concepts explaining why financial contracts, markets, and intermediaries arise (for definitions of terms, see Box 6.1).

Type: Chapter
Information: Managing Economic Volatility and Crises
A Practitioner's Guide
, pp. 213 - 280

DOI: https://doi.org/10.1017/CBO9780511510755.009 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2005

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Book purchase

Temporarily unavailable

References

Agenor, Pierre-Richard, and Joshua, Aizenman. 2002. “Financial Sector Inefficiencies and the Debt Laffer Curve.” Working Paper 2842. World Bank, Washington, DCCrossRef Google Scholar

Alba, Pedro, Bhattacharya, Amar, Claessens, Stijn, Ghosh, Swati, and Leonardo, Hernandez. 1998. “Options to Respond to Currency Turbulence in Southeast Asia.” World Bank, Washington, DCGoogle Scholar

Alba, Pedro, Amar Bhattacharya, Stijn Claessens, Swati Ghosh, and Leonardo Hernandez. 1999. “The Role of Macro-Economic and Financial Sector Linkages in East Asia's Financial Crisis.” In Richard Agenor, Pierre, Miller, Marcus, Vines, David, and Weber, Axel, eds., The Asian Financial Crisis: Cause, Contagion, and Consequences. Cambridge, UK: Cambridge University Press, pp. 9–64CrossRef Google Scholar

Allayannis, George, Lel, Ugur, and Darius, Miller. 2003. “Corporate Governance and the Hedging Premium.” University of Virginia, Darden Business SchoolGoogle Scholar

Allen, Franklin, and Douglas, Gale. 2000a. Comparing Financial Systems. Cambridge and London: MIT PressGoogle Scholar

Allen, Franklin, and Douglas, Gale. 2000b. “Financial Contagion.” Journal of Political Economy 108(1):1–33CrossRef Google Scholar

Allen, Franklin, and Gale, Douglas. 2004. “Competition and Financial Stability.” Journal of Money, Credit and Banking, 36(3) Pt. 2, 453–80CrossRef Google Scholar

Asian Development Bank (ADB). 1998. “Managing Global Integration in Asia: Emerging Lessons and Prospective Challenges.” Manila. Processed

Asian Development Bank (ADB). 2005. Early Warning System of Financial Crises: Applications to East Asia. Palgrave MacMillan, Houndsmill, Basnigstoke and New York

Bae, K. H., Lim, Chanwoo, and Wei, K. C. John. 2003. “Corporate Governance and Conditional Skewness in World's Stock Markets.” Hong Kong University of Science and TechnologyGoogle Scholar

Baer, Herbert, and Daniela, Klingebiel. 1995. “Systemic Risk when Depositors Bear Losses: Five Case Studies.” Research in Financial Services Private and Public Policy 7:195–302Google Scholar

Barth, James R., Gerard Caprio Jr., and Ross Levine. 2001. “The Regulation and Supervision of Banks around the World: A New Database.” In Robert, E. Litan and Herring, Richard, eds., Integrating Emerging Market Countries into the Global Financial System. Brookings–Wharton Papers on Financial Services. Washington, DC: Brookings Institution PressGoogle Scholar

Barth, J. R., Gerard, Caprio Jr., and Ross, Levine. 2004. “Bank Supervision and Regulation: What Works Best?” Journal of Financial Intermediation 13(2):205–48CrossRef Google Scholar

Beck, Thorsten, Demirgüç-Kunt, Asli, and Ross, Levine. 2000. “A New Database on the Structure and Development of the Financial Sector.” World Bank Economic Review 14:597–605CrossRef Google Scholar

Beck, Thorsten, Demirgüç-Kunt, Asli, and Levine, Ross. 2003. “Bank Concentration and Crises.” World Bank and University of MinnesotaCrossRef Google Scholar

Beck, Thorsten, Demirgüç-Kunt, Asli, and Vojislav, Maksimovic. 2004. “Bank Competition, Financing Constraints and Access to Credit.” Journal of Money Credit and Banking 36(3) Pt. 2, 627–48CrossRef Google Scholar

Beck, Thorsten, Lundberg, Mattias, and Giovanni, Majnoni. 2001. “Financial Development and Economic Volatility: Does Finance Dampen or Magnify Shocks?” Policy Research Working Paper 2707. World Bank, Washington, DCGoogle Scholar

Bekaert, G., and Harvey, C. R.. 2003. “Emerging Markets Finance.” Journal of Empirical Finance 10(1–2):3–6CrossRef Google Scholar

Bekaert, G., Harvey, C., and Christian, Lundblad. Forthcoming. “Does Financial Liberalization Spur Growth?Journal of Financial EconomicsGoogle Scholar

Bekaert, G., Harvey, C., and Lundblad, C.. 2004. “Growth Volatility and Equity Market Liberalization,” NBER Working Paper 10560, Cambridge, MACrossRef Google Scholar

Berg, Andrew, and Catherine, Pattillo. 1999. “Are Currency Crises Predictable: A Test.” IMF Staff Papers 46(2):107–38Google Scholar

Bernanke, B., and Lown, C.. 1991. “The Credit Crunch.” Brooking's Papers on Economic Activity, 2:205–47CrossRef Google Scholar

Bernanke, Ben, and Mark Gertler. 1987. “Banking and Macroeconomic Equilibrium.” In Barnett, William and Singleton, Ken, eds., New Approaches to Monetary Economics. Cambridge, UK: Cambridge University PressCrossRef

Bernanke, Ben, and Gertler, Mark. 1995. “Inside the Black Box: The Credit Channel of Monetary Policy Transmission.” Journal of Economic Perspectives 9(4):27–28CrossRef Google Scholar

BIS (Bank for International Settlements). 1999. “Capital Requirement and Bank Behavior: The Impact of the Basel Accord.” Basel Committee on Banking Supervision Working Papers, Basel, Switzerland

Blaschke, Winfrid, Jones, Matthew T., Majnoni, Giovanni, and Martinez Peria, Soledad. 2001. “Stress Testing of Financial Systems: An Overview of Issues, Methodologies, and FSAP Experiences.” IMF Working Paper 01/88. International Monetary Fund, Washington DCGoogle Scholar

Bleijer, Mario, and Liliana Schumacher. 2002. “VAR for Central Banks' Risk.” Volume 11. In Hana, Polackova Brixi and Schick, Allen, eds., Government at Risk. Contingent Liabilities and Fiscal Risk. New York: Oxford University Press for the World BankGoogle Scholar

Bongini, Poala, Claessens, Stijn, and Giovanni, Ferri. 2001. “The Political Economy of Bank Distress: Evidence from East Asia.” Journal of Financial Services Research 19(1):5–25CrossRef Google Scholar

Bordo, Michael, Eichengreen, Barry, Klingebiel, Daniela, and Maria, Soledad Martinez-Peria. 2001. “Is the Crisis Problem Growing More Severe?” Economic Policy 16(32):51–82CrossRef Google Scholar

Borio, Claudio, and Philip Lowe. 2002. “Asset Prices, Financial and Monetary Stability: Exploring the Nexus. BIS Working Paper 114 (July): 1–35. Bank for International Settlements

Brock, Philip L., and Rojas Suárez, Liliana. 2000. “Understanding the Behavior of Bank Spreads in Latin America.” Journal of Development Economics (Netherlands) 63(1): 113–34CrossRef Google Scholar

Caballero, R. 2000. “Structural Volatility in Modern Latin America,” mimeo, MIT, Cambridge, MAGoogle Scholar

Caballero, R., and Krishnamurty, A.. 2001. “International and Domestic Collateral Constraints in a Model of Emerging Market Crises.” Journal of Monetary Economics 48(3):513–48CrossRef Google Scholar

Calomiris, Charles W., and Powell, Andrew. 2000. “Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992–1999.” NBER Working Paper 7715: 1–45. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Calvo, G., Leiderman, L., and Reinhart, C.. 1994. “Capital Flows and Macroeconomic Management: Tequila Lessons.” International Journal of Finance and Economics 1(3):207–243.0.CO;2-3>CrossRef Google Scholar

Caprio, Gerard, and Stijn, Claessens. 1997. “Importance of the Financial System for Development.” Background paper for World Bank Board Seminar on Financial Sector, April 1997. World Bank, Washington, DCGoogle Scholar

Caprio, Gerard, and Patrick, Honohan. 2002. Banking Policy and Macroeconomic Stability: An Exploration. Working Paper 2856. World Bank, Washington, DCCrossRef Google Scholar

Caprio, Gerard, Jr., and Daniela Klingebiel. 1997. “Bank Insolvency: Bad Luck, Bad Policy, or Bad Banking?” In Michael, Bruno and Pleskovic, Boris, eds., Annual World Bank Conference on Development Economics. Washington, DC: World BankGoogle Scholar

Caprio, Gerard, Jr., and Daniela Klingebiel. 2002. “Episodes of Systemic and Borderline Financial Crises.” In Daniela, Klingebiel and Laeven, Luc, eds., Managing the Real and Fiscal Effects of Banking Crises. World Bank Discussion Paper 428. Washington, DCGoogle Scholar

Cetorelli, N. 2001. “Does Bank Concentration Lead to Concentration in Industrial Sectors?” FRB Chicago WP 2001-01

Cetorelli, N. and P. Strahan. 2004. “Finance as a Barrier to Entry. Bank Competition and Industry Structure in Local U.S. Markets.” Federal Reserve Bank of Chicago WP 2004-04

Chang, Roberto, and Andres, Velasco. 2001. “A Model of Financial Crises in Emerging Markets.” Quarterly Journal of Economics CXVI 2:489–517CrossRef Google Scholar

Chari, V., and Jagannathan, R.. 1988. “Banking Panics, Information, and Rational Expectations Equilibrium.” Journal of Finance 43(3):749–61CrossRef Google Scholar

Chinn, M., and Kletzer, K.. 2000. “International Capital Inflows, Domestic Financial Intermediation and Financial Crises under Imperfect Information.” NBER Working Paper 7902. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Choe, H., Kho, B., and Stulz, R.. 1999. “Do Foreign Investors Destabilize Stock Markets? The Korean Experience in 1997.” Journal of Financial Economics 54(2):227–64CrossRef Google Scholar

Christiano, L., M. Eichenbaum, and C. Evans. 1999. “Monetary Policy Shocks: What Have We Learned and to What End?” In Michael, Woodford and Taylor, John, eds., Handbook of Macroeconomics. Amsterdam, NY: ElsevierGoogle Scholar

Claessens, Stijn, Asli, Demirgüç-Kunt and Huizinga, Harry. 2001. “How Does Foreign Entry Affect Domestic Banking Markets?” Journal of Banking and Finance 25:891–911CrossRef Google Scholar

Claessens, Stijn, Djankov, Simeon, and Giovanni, Ferri. 1999. “Corporate Distress in East Asia: Assessing the Impact of Interest and Exchange Rates Shocks.” Emerging Markets Quarterly 3(2):8–13Google Scholar

Claessens, Stijn, Djankov, Simeon, and Daniela, Klingebiel. 1999. Financial Restructuring in East Asia: Half Way There? Financial Sector Discussion Paper 3. World Bank, Washington, DCGoogle Scholar

Claessens, Stijn, Djankov, Simeon, and Mody, Ashoka, eds. 2001. Resolution of Financial Distress. Washington, DC: World Bank InstituteGoogle Scholar

Claessens, Stijn, Simeon Djankov, and Tatiana Nenova. 2001. “Corporate Risk around the World.” In Glick, Reuven, Moreno, Ramon, and Spiegel, Mark, eds., Financial Crises in Emerging Markets. Cambridge, UK: Cambridge University PressCrossRef Google Scholar

Claessens, Stijn, and Forbes, Kristin, eds. 2001. International Financial Contagion. Boston: Kluwer Academic PressCrossRef Google Scholar

Claessens, Stijn, and Thomas, Glaessner. 1997. “Are Financial Sector Weaknesses Undermining the East Asian Miracle?” Directions in Development. World Bank, Washington, DCGoogle Scholar

Claessens, Stijn, and Daniela Klingebiel. 2002. “Fiscal Risks of the Banking System: Approaches to Measuring and Managing Contingent Government Liabilities in the Banking Sector.” In Hana, Polackova Brixi and Schick, Allen, eds., Government at Risk. Contingent Liabilities and Fiscal Risk. New York: Oxford University Press for the World Bank, 311–34Google Scholar

Claessens, Stijn, Daniela Klingebiel, and Luc Laeven. 2003a. “Financial Restructuring in Banking and Corporate Sector Crises, What Polices to Pursue?” In Michael, Dooley and Frankel, Jeffrey, eds., Currency Crises Management. Chicago: NBER/University of Chicago Press, 147–80Google Scholar

Claessens, Stijn, Daniela Klingebiel, and Luc Laeven. Forthcoming. “Resolving Systemic Crises: Policies and Institutions,” Chapter 6, forthcoming in Laeven, Luc, ed., Systemic Crises, World Bank, Cambridge University Press

Clarke, George, Cull, Robert, and Soledad, MariePeria, Martinez. 2001. “Does Foreign Bank Penetration Reduce Access to Credit in Developing Countries: Evidence from Asking Borrowers.” Policy Research Working Paper 2716. World Bank, Washington, DCGoogle Scholar

Colaco, Francis, Hallward-Driemeier, Mary, and Dwor-Frecaut, Dominique. 1999. “Asian Corporate Recovery: A Firm-Level Analysis.” World Bank, Washington, DCGoogle Scholar

Corsetti, Giancarlo, Pesenti, Paolo, and Nouriel, Roubini. 1999. “What Caused the Asian Currency and Financial Crisis?” Japan and the World Economy 3(September):305–73CrossRef Google Scholar

Cull, Robert, Senbet, Lemma W., and Sorge, Marco. 2005. “Deposit Insurance and Financial Development.” Journal of Money Credit and Banking 37(1):43–82CrossRef Google Scholar

Dado, Marinela. 2000. “Note on Centralized Asset Management Companies in Indonesia, Korea and Thailand.” World Bank, Washington, DCGoogle Scholar

Dado, Marinela, and Daniela, Klingebiel. 2002. “Decentralized, Creditor-Led Corporate Restructuring: Cross-Country Experience.” World Bank, Washington, DC Policy Research Working Paper 2901Google Scholar

Demirgüç-Kunt, Asli, and Detragiache, Enrica. 1998. “The Determinants of Banking Crises in Developing and Developed Countries.” IMF Staff Papers 45(1):81–109. International Monetary Fund, Washington, DCCrossRef Google Scholar

Demirgüç-Kunt, Aslι, and Enrica Detragiache. 1999. “Financial Liberalization and Financial Fragility.” In Pleskovic, B. and Stiglitz, J. E., eds., Proceedings of the 1998 World Bank Conference on Development Economics. Washington, DC: World Bank

Demirgüç-Kunt, Aslι, and Enrica, Detragiache. 2002. “Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation.” Journal of Monetary Economics 49:1373–406CrossRef Google Scholar

Demirgüç-Kunt, Asli, and Levine, Ross, eds. 2001. Financial Structure and Economic Growth: A Cross-Country Comparison of Banks, Markets, and Development. Cambridge, MA: MIT PressGoogle Scholar

Demirgüç-Kunt, Asli, and Edward, Kane. 2002. “Deposit Insurance around the Globe: Where Does it Work?” Journal of Economic Perspectives 16(2):17–195Google Scholar

Diamond, Douglas W., and Dybvig, Philip H.. 1983. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy 91(3):401–19CrossRef Google Scholar

Diamond, Douglas W., and Rajan, Raghurajan. 2002. “Liquidity Shortages and Banking Crises.” NBER Working Paper 8937. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Ding, Wei, Domac, Ilker, and Giovanni, Ferri. 1998. “Is There a Credit Crunch in East Asia?” Policy Research Working Paper 1959. World Bank, Washington, DCGoogle Scholar

Djankov, S., J. Jindra, and L. F. Klapper. 2000. “Resolution of Bank Insolvency and Borrower Valuation in East Asia.” In The Changing Financial Industry Structure and Regulation: Bridging States, Countries, and Industries. Bank Structure Conference Proceedings. Chicago: Federal Reserve Bank of Chicago

Dollar, David, and Mary, Hallward-Driemeier. 1999. “Crisis, Adjustment, and Reform in Thailand's Industrial Firms.” World Bank Research Observer 15(1):1–22CrossRef Google Scholar

Domac, Ilker, and Ferri, Giovanni. 1999. “The Credit Crunch in East Asia: Evidence from Field Findings on Bank Behavior.” World Bank, Washington, DCGoogle Scholar

Dooley, Michael P. 2000. “A Model of Crises in Emerging Markets.” Economic Journal 110:256–72CrossRef Google Scholar

Dooley, Michael, and Frankel, Jeffrey, eds., 2003. Managing Currency Crises in Emerging Markets. Chicago: University of Chicago PressCrossRef Google Scholar

Dooley, Michael, and Sujata Verma. 2003. “Rescue Packages and Output Losses Following Crises.” In Michael, Dooley and Frankel, Jeffrey, eds., Managing Currency Crises in Emerging Markets. Chicago: University of Chicago PressGoogle Scholar

Dornbusch, Rudiger, Chul Park, Yung, and Stijn, Claessens. 2000. “Contagion: Understanding How It Spreads.” World Bank Research Observer 15(2):177–97CrossRef Google Scholar

Draghi, Mario, Giavazzi, Francesco, and Merton, Robert C.. 2003. “Transparency, Risk Management and International Financial Fragility.” Harvard Business School Working Paper 03-118; Harvard NOM Working Paper 03-41. Harvard University, Cambridge, MACrossRef Google Scholar

Easterly, William, Islam, Roumeen, and Stiglitz, Joseph E.. 2000. “Shaken and Stirred: Explaining Growth Volatility.” Annual World Bank Conference on Development Economics191–211Google Scholar

ECB (European Central Bank). 2002. Report on Financial Structures. Frankfurt am Main

Edwards, Sebastian, and Frankel, Jeffrey A.. 2002. Preventing Currency Crises in Emerging Markets. Chicago: University of Chicago PressCrossRef Google Scholar

Eichengreen, Barry. 2003. Capital Flows and Crises. Cambridge, MAGoogle Scholar

Eichengreen, Barry, and Hausmann, Ricardo, eds. 2005. Other People's Money: Debt Denomination and Financial Instability in Emerging Market Economies. Chicago: University of Chicago PressCrossRef Google Scholar

Ferri, G., Kang, T. S., and Kim, I. J.. 2001. “The Value of Relationship Banking during Financial Crisis: Evidence from Republic of Korea.” Working Paper 2553. World Bank, Washington, DCCrossRef Google Scholar

Fischer, Stanley. 1999. “On the Need for an International Lender of Last Resort.” Journal of Economic Perspectives 13(4):85–104CrossRef Google Scholar

Fischer, Stanley. 2002. “Financial Crises and the Reform of the International Financial System.” NBER Working Paper 9297. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Flood, Robert P., and Garber, Peter M.. 1984. “Collapsing Exchange-Rate Regimes: Some Linear Examples.” Journal of International Economics 17:1–13CrossRef Google Scholar

Frankel, Jeffrey, and Dooley, Michael, eds. 2003. Managing Currency Crises in Emerging Markets. NBER Conference Report. National Bureau of Economic Research, Cambridge, MAGoogle Scholar

Frenkel, . 2000. “No Single Currency Regime is Right for All Countries or at All Times,” Graham Lecture, Princeton University. Essays in International Finance No. 215, Princeton University PressGoogle Scholar

Furman, Jason, and Stiglitz, Joseph. 1998. “Economic Crises: Evidence and Insights from East Asia.” Brooking's Papers on Economic Activity 1:1–135. Washington, DCGoogle Scholar

Gertler, M., and Gilchrist, S.. 1994. “Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms.” Quarterly Journal of Economics, MayCrossRef Google Scholar

Ghosh, Swati, and Ghosh, Atish R.. 1999. “East Asia in the Aftermath – Was There a Crunch?” IMF Working Paper 99/38. International Monetary Fund, Washington, DCGoogle Scholar

Goldstein, Morris, Kaminski, Graciela L., and Reinhart, Carmen M.. 2000. Assessing Financial Vulnerabilities: An Early Warning System for Emerging Markets. Washington, DC: Institute for International EconomicsGoogle Scholar

Gorton, Gay. 1988. “Banking Panics and Business Cycles.” Oxford Economic Papers 40(3):221–55CrossRef Google Scholar

Greenspan, Alan. 1999. “Lessons from the Global Crises.” Speech at the World Bank-IMF Annual Meetings, Washington, DC. Available at http://www.bog.frb.fed.us/BoardDocs/speeches/1999/199909272.HTM

Greenwald, Bruce. 1998. “International Adjustment in the Face of Imperfect Financial Markets.” Paper prepared for the Tenth Annual Bank Conference on Development Economics, April 21, Washington, DC

Griffin, John M., Nardari, Federico, and Stulz, René M.. 2004. “Daily Cross-Border Equity Flows: Pushed or Pulled?Review of Economics and Statistics 86(3):641–57CrossRef Google Scholar

Group of Ten. 2001. Report on Consolidation in the Financial Sector. Available at the Bank for International Settlements website. http://www.bis.org/publ/gten05.pdf

Group of Ten. 2002. Turbulence in Asset Markets: The Role of Micro Policies Report of the Contact Group on Asset Prices. Available at the Bank for International Settlements website. http://www.bis.org/publ/gten07.htm#pgtop

Haggard, Stephan. 2001. “The Politics of Corporate and Financial Restructuring: A Comparison of Korea, Thailand and Indonesia.” In Claessens, Stijn, Djankov, Simeon, and Mody, Ashoka, eds., Resolution of Financial Distress. Washington, DC: World Bank InstituteGoogle Scholar

Hanson, James A., Patrick Honohan, and Giovanni Majnoni. 2003. “Globalization and National Financial Systems: Issues of Integration and Size.” In Hanson, James, Honohan, Patrick, and Majnoni, Giovanni, eds., Globalization and National Financial Systems. New York: Oxford University Press for the World BankGoogle Scholar

Harvey, Campbell, and Andrew H. Roper. 1999. “The Asian Bet.” In Litan, Robert, Pomerleano, Michael, and Harwood, Alison, eds., Financial Markets and Development: Preventing Crises in Emerging Markets. Washington, DC: Brookings Institution/World BankGoogle Scholar

Hellman, Thomas, Murdock, Kevin, and Joseph, Stiglitz. 2000. “Liberalization, Moral Hazard in Banking, and Prudential Regulation. Are Capital Requirements Enough?” American Economic Review 90:147–65CrossRef Google Scholar

Henry, Peter Blair. 2003. “Capital-Account Liberalization and the Cost of Capital, and Economic Growth. American Economic Review, Papers and Proceedings 93(2):91–96CrossRef Google Scholar

Hoelscher, David, and Marc Quintyn. 2003. “Managing Systemic Banking Crises.” IMF (International Monetary Fund) Occasional Paper 224

Honohan, Patrick. 1999. “Fiscal Contingency Planning for Banking Crises.” Policy Research Working Paper 2228. World Bank, Washington, DCCrossRef Google Scholar

Honohan, Patrick, and Klingebiel, Daniela. 2003. “The Fiscal Cost Implication of an Accommodating Approach to Banking Crises.” Journal of Banking and Finance 27(8):1539–60CrossRef Google Scholar

Hoshi, T., and Kashyap, A.. 2001. Corporate Financing and Governance in Japan. Cambridge, MA: MIT PressGoogle Scholar

Jacklin, C., and Bhattacharya, S.. 1988. “Distinguishing Panics and Information-Based Bank Runs: Welfare and Policy Implications.” Journal of Political Economy 96(3):568–92CrossRef Google Scholar

Johnson, Simon, Boone, Peter, Breach, Alasdair, and Eric, Friedman. 2000. “Corporate Governance in the Asian Financial Crisis.” Journal of Financial Economics 58(4):141–86CrossRef Google Scholar

Kaminsky, Graciela L., and Reinhart, Carmen M.. 1999. “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems.” American Economic Review 89(3):473–500CrossRef Google Scholar

Kaminsky, Graciela, Lyons, Richard, and Sergio, Schmukler. 2001. “Mutual Fund Investment in Emerging Markets – An Overview.” World Bank Economic Review 15:315–40CrossRef Google Scholar

Karolyi, G. A. 2004. “The Role of ADRs in the Development and Integration of Emerging Equity Markets.” Review of Economics and Statistics 86(3):670–90CrossRef Google Scholar

Karolyi, Andrew, and Rene Stulz. 2003. “Are Assets Priced Locally or Globally?” In Constantinides, George, Harris, Milton, and Stulz, René, eds., The Handbook of the Economics of Finance. North Holland

Kashyap, A., Stein, J., and Wilcox, D.. 1993. “Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance.” American Economic Review 83(1):78–98Google Scholar

Kashyap, Anil, and Jeremy Stein. 1994. “Monetary Policy and Bank Lending.” In Mankiw, Gregory, ed., Monetary Policy. Chicago: University of Chicago PressCrossRef Google Scholar

Kindleberger, Charles. 1978. Manias, Panics, and Crashes: A History of Financial Crises. New York: Basic BooksCrossRef Google Scholar

Klingebiel, Daniela. 2001. “The Role of Asset Management Companies in the Resolution of Banking Crises.” In Claessens, Stijn, Djankov, Simeon, and Mody, Ashoka, eds., Resolution of Financial Distress. Washington, DC: World Bank InstituteGoogle Scholar

Krugman, Paul. 1979. “A Model of Balance-of-Payments Crises.” Journal of Money, Credit, and Banking 11:311–25CrossRef Google Scholar

Krugman, Paul. 1997. “Are Currency Crises Self-Fulfilling?” In NBER Macroeconomics Annual. Cambridge, MA: MIT PressGoogle Scholar

Krugman, Paul. 1999. “Balance Sheets, the Transfer Problem, and Financial Crises.” In Isard, Peter, Razin, Assaf, and Rose, Andrew K., eds., International Finance and Financial Crises: Essays in Honor of Robert P. Flood, Jr.Boston: Kluwer Academic PublishersCrossRef Google Scholar

Rafael, Porta, Lopez-de-Silanes, Florencio, Shleifer, Andrei, and Robert, Vishny. 1997. “Legal Determinants of External Finance.” Journal of Finance 52:1131–50Google Scholar

Rafael, Porta, Lopez-de-Silanes, Florencio, Shleifer, Andrei, and Robert, Vishny. 2002. “Government Ownership of Banks.” Journal of Finance 57(1):265–302Google Scholar

Laeven, Luc. 1999. “Risk and Efficiency in East Asian Banks.” Policy Research Working Paper 2255. World Bank, Washington, DCCrossRef Google Scholar

Laeven, Luc. 2002. Pricing of Deposit Insurance. Working Paper 2871. World Bank, Washington, DCCrossRef Google Scholar

Laeven, Luc. 2003. “Does Financial Liberalization Reduce Financing Constraints?” Financial Management 32(1):5–34CrossRef Google Scholar

Lane, Timothy, Atish Ghosh, A. Javier Hamann, Steven Phillips, Marianne Schultze-Ghattas, and Tsidi Tsikata. 1999. IMF-Supported Programs in Indonesia, Korea, and Thailand, IMF Occasional Papers 178, IMF, Washington, DC

Lel, Ulgur. 2003. “Currency Hedging, Corporate Governance and Financial Markets Development.” Working Paper. Indiana UniversityGoogle Scholar

Lemmon, M. L., and Lins, K. V.. 2003. “Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis.” Journal of Finance 58(4): 1445–68CrossRef Google Scholar

Levine, Ross. 2005. “Finance and Growth: Theory, Evidence, and Mechanisms.” In Phillipe, Aghion and Durlauf, Steven, eds., Handbook of Economic Growth. Amsterdam: North-Holland Elsevier Publishers, forthcomingGoogle Scholar

Levine, Ross, and Sarah, Zervos. 1998. “Stock Markets, Banks, and Economic Growth.” American Economic Review 88:537–58Google Scholar

Lindgren, Carl-Johan, Garcia, Gillian, and Saal, Matthew I.. 1996. Bank Soundness, and Macroeconomic Policy. Washington, DC: International Monetary FundGoogle Scholar

Love, Inessa. 2003. “Financial Development and Financing Constraints: International Evidence from the Structural Investment Model.” Review of Financial Studies 16:765–91CrossRef Google Scholar

Lucas, R. E. 1976. “Econometric Policy Evaluation: A Critique.” Carnegie-Rochester Conference Series on Public Policy 1:19–46CrossRef Google Scholar

Merton, Robert C. 2002. “Future Possibilities in Finance Theory and Finance Practice.” In Geman, H., Madan, D., Pliska, S., and Vorst, T., eds., Mathematical Finance: Bachelier Congress 2000. Berlin, NY: SpringerCrossRef Google Scholar

Miron, J. 1985. “Financial Panics, the Sensitivity of the Nominal Interest Rate, and the Founding of the Fed.” American Economic Review 76(1):125–40Google Scholar

Mishkin, F. 1996. “Understanding Financial Crises: A Developing Country Perspective.” NBER Working Paper 5600. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Mitton, Todd. 2002. “A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial Crisis.” Journal of Financial Economics 64:215–41CrossRef Google Scholar

Mulder, Christian, Perrelli, Roberto, and Manuel, Rocha. 2002. “The Role of Corporate, Legal, and Macroeconomic Balance Sheet Indicators in Crisis Detection and Prevention.” IMF Working Paper 02/59. International Monetary Fund, Washington, DCGoogle Scholar

Obstfeld, Maurice. 1986. “Rational and Self-Fulfilling Balance-of-Payments Crises.” American Economic Review 76(1):72–81Google Scholar

Obstfeld, Maurice. 1994. “Risk-Taking, Global Diversification, and Growth.” American Economic Review 84(December):1310–29Google Scholar

Obstfeld, Maurice, and Kenneth, Rogoff. 2000. “The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? NBER Working Paper 7,777: 1–64. National Bureau of Economic Research, Cambridge, MACrossRef Google Scholar

Peria, Maria Soledad Martinez, and Schmukler, Sergio L.. 2001. “Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises.” Journal of Finance 56(3):1029–51CrossRef Google Scholar

Pesenti, Paolo, and Till, Cedric. 2000. “The Economics of Currency Crises and Contagion.” Federal Reserve Bank of New York. Economic Policy Review Bulletin (September), 3–16Google Scholar

Raddatz, Claudio. 2003. “Liquidity Needs and Vulnerability to Financial Underdevelopment.” World Bank Policy Research Working Paper 3161CrossRef Google Scholar

Rajan, Raghuram, and Luigi, Zingales. 1998. “Financial Dependence and Growth.” American Economic Review 88(3):559–96Google Scholar

Rodrik, Dani. 2000. “How Far Will International Economic Integration Go?” Journal of Economic Perspectives 14(1):177–86CrossRef Google Scholar

Rojas-Suarez, Liliana. 2001. “Rating Banks in Emerging Markets.” Working Paper 01-6: May. Institute for International Economics, Washington, DCGoogle Scholar

Sheng, Andrew, ed. 1996. Bank Restructuring: Lessons from the 1980s. Washington, DC: World BankCrossRef Google Scholar

Shiller, Robert. 2003. The New Financial Order: Risk in the 21st Century. Princeton, NJ: Princeton University PressGoogle Scholar

Standard & Poor's Sovereign Ratings Service. 1999. “Global Financial System Stress: 24 Show Adverse Trends in Credit Quality.”

Stiglitz, Joseph E. 2001a. “Bankruptcy Laws: Basic Economic Principles.” In Claessens, Stijn, Djankov, Simeon, and Mody, Ashoka, eds., Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws. Washington, DC: World Bank InstituteGoogle Scholar

Stiglitz, Joseph E. 2001b. “Principles of Financial Regulation: A Dynamic Portfolio Approach.” World Bank Research Observer 16(1):1–18CrossRef Google Scholar

Stiglitz, Joseph E., and Amar Bhattacharya. 1999. “Underpinnings for a Stable and Equitable Global Financial System: From Old Debates to a New Paradigm.” Paper prepared for the Eleventh Annual Bank Conference on Development Economics, April 28–30, Washington, DC

Stiglitz, Joseph E., and Andrew, Weiss. 1981. “Credit Rationing in Markets with Imperfect Information.” American Economic Review 71(3):393–410Google Scholar

Stulz, R. 1999. “International Portfolio Flows and Security Markets.” In Feldstein, Martin, ed., International Capital Flows. NBER Conference Report. Chicago: University of Chicago PressCrossRef Google Scholar

Tirole, Jean. 2002. Financial Crises, Liquidity, and the International Monetary System. Princeton, NJ: Princeton University PressCrossRef Google Scholar

Townsend, Robert M. 1981. “Resource Allocation under Asymmetric Information.” Econometrica 49:33–64Google Scholar

Vasquez, F. 2003. “Bank Lending and Monetary Conditions in Emerging Economies: International Evidence on the Lending Channel,” mimeo IMF

Vives, Xavier. 2001. “Competition in the Changing World of Banking.” Oxford Review of Economic Policy 17:535–45CrossRef Google Scholar

World Bank. 1999. “Korea Country Economic Memorandum.” Washington, DC

World Bank. 2001. Finance for Growth: Policy Choices in a Volatile World. Washington, DC