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This paper analyzes the structural implications of EMU for international capital markets. It discusses the potential size of euro capital markets and the existing roles of European currencies in international capital markets. The paper also examines the euro’s impact on international securities markets, including the role of the ECB, the evolution of EMU securities markets, and aspects of systemic risk management. The implications for wholesale and retail banking markets are also discussed, as are the broader implications of the introduction of the euro for changes in international capital flows, international portfolios, and by implication exchange rates.

Banks and Banking --- Finance: General --- Money and Monetary Policy --- International Monetary Arrangements and Institutions --- Financial Aspects of Economic Integration --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Finance --- Banking --- Monetary economics --- Securities markets --- Currencies --- Capital markets --- Stock markets --- Financial markets --- Money --- Competition --- Capital market --- Banks and banking --- Stock exchanges --- United States

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Many inflation stabilizations succeed only temporarily. Using a sample of 51 episodes of stabilization from inflation levels above 40 percent, we show that most of the failures are explained by bad luck, unfavorable initial conditions, and inadequate political institutions. The evolution of trading partners' demand and U.S. interest rates captures the effect of bad luck. Past inflation affects the outcome in two different ways: a long history of high inflation makes failure more likely, while a high level of inflation prior to stabilization increases the chances of success. Countries with short-lived political institutions, a weak executive authority, and proportional electoral rules also tend to fail. After controlling for all these factors, we find that exchange-rate-based stabilizations are more likely to succeed. These findings are robust across measures of failure (two dichotomous and one continuous), sample selection criteria, and estimation techniques, including Heckman's correction for the endogeneity of the anchor.

Econometrics --- Foreign Exchange --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Price Level --- Deflation --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Fiscal Policy --- Monetary Policy --- Estimation --- Monetary economics --- Econometrics & economic statistics --- Currency --- Foreign exchange --- Fiscal consolidation --- Exchange rate anchor --- Estimation techniques --- Real exchange rates --- Prices --- Fiscal policy --- Monetary policy --- Econometric analysis --- Econometric models --- Argentina

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This paper proposes a signaling model that offers a new perspective on why governments deviate from optimal tax smoothing and delay debt stabilization. In our model, dependable—but not fully credible—governments have an incentive to tighten the fiscal regime when the signaling effect on credit ratings is larger (that is, when a sufficiently large stock of debt has been accumulated). At this point, they may deviate from tax smoothing not to be mimicked by weak governments. The model predicts that primary balances and debt stocks are complementary inputs in the credit rating function as tests on Italian, Irish, Belgian, and Danish data show.

Investments: Stocks --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- International Migration --- Fiscal Policy --- Debt --- Debt Management --- Sovereign Debt --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Investment & securities --- Monetary economics --- Fiscal stance --- Public debt --- Stocks --- Credit ratings --- Expenditure --- Fiscal policy --- Financial institutions --- Money --- Debts, Public --- Expenditures, Public --- Belgium

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International finance --- European Union

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Zonder onderwerpscode: financiewezen