Missing the point

Article Abstract:

There is a need to tackle problems exposed by instability in world financial markets, but smaller measures are more helpful than grandiose schemes for redesigning the system as a whole. Japan has proposed capital controls, and germany has proposed exchange rate zones, neither of which are helpful. The US proposes contingent finance to prevent financial contagion, but the International Monetary Fund lacks resources and the US has refused to pay a routine contribution. The countries affected by the crisis are best able to tackle the problem, and Japan, for example, should reform its banking system.

Editorial, Laws, regulations and rules

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The price of uncertainty

Article Abstract:

There was concern that financial markets had become more volatile after the events of summer 1998, but this has not proved to be true. Financial markets seek to assess risks and set a price on it, and this very activity could increase the risks assessed. There have been a number of crises such as the crash of 1987, and investors had not seen them as likely. Dynamic hedging can create problems, as can regulations on capital adequacy of banks, and information technology, since capital flows have become more rapid.

Analysis, Risk (Economics)

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Diminishing returns

Article Abstract:

There are a number of proposals for the world financial system such as boosting incentives for sound policies and linking International Monetary Fund (IMF) interest rates with policies. Tax policy on short-term capital flows could help bring stability. Collective action clauses in sovereign bond contracts are proposed as a way of fostering private-sector burden-sharing. Pegged exchange rates could be discourages. There is also a need to make a distinction between systemic crises and country crises.

International Affairs, Finance, taxation, & monetary policy, Intnl Monetary Fund, International Monetary Fund, Economic policy

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