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Name: Global financial stability report march market developments and issues world economic and finan. List of reports with a description for each. Chinese Bond Market Developments. Global Financial Stability Report March 2002 Market Developments And Issues World Economic And Finan The Global Financial Stability Report GFSR provides expert and up-to-date analysis of global capital flows that play a critical role in world economic growth and Financial stability. International Finance Division,.
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade financing.
Since emerging in the late 19th century during the first modern wave of economic globalizationits evolution is marked by the establishment of central banksmultilateral treatiesand intergovernmental organizations aimed at improving the transparencyregulationand effectiveness of international markets.
At the onset of World War Itrade contracted as foreign exchange markets became paralyzed by money market illiquidity. Countries sought to defend against external shocks with protectionist policies and trade virtually halted byworsening the effects of the global Great Depression until a series of reciprocal trade agreements slowly reduced tariffs worldwide. Efforts to revamp the international monetary system after World War II improved exchange rate stability, fostering record growth in global finance.
A series of currency devaluations and oil crises in the s led most countries to float their currencies.
The world economy became increasingly financially integrated in the s and s due to capital account liberalization and financial deregulation. A series of financial crises in Europe, Asia, and Latin America followed with contagious effects due to greater exposure to volatile capital flows.
The global financial crisiswhich originated in the United States inquickly propagated among other nations and is recognized as the catalyst for the worldwide Great Recession.
A market adjustment to Greece's noncompliance with its monetary union in ignited a sovereign debt crisis among European nations known as the Eurozone crisis. A country's decision to operate an open economy and globalize its financial capital carries monetary implications captured by the balance of payments. It also renders exposure to risks in international financesuch as political deterioration, regulatory changes, foreign exchange controls, and legal uncertainties for property rights and investments.
Both individuals and groups may participate in the global financial system. Consumers and international businesses undertake consumption, production, and investment. Governments and intergovernmental bodies act as purveyors of international trade, economic development, and crisis management. Regulatory bodies establish financial regulations and legal procedures, while independent bodies facilitate industry supervision.
Research institutes and other associations analyze data, publish reports and policy briefs, and host public discourse on global financial affairs. While the global financial system is edging toward greater stability, governments must deal with differing regional or national needs. Some nations are trying to systematically discontinue unconventional monetary policies installed to cultivate recovery, while others are expanding their scope and scale. Emerging market policymakers face a challenge of precision as they must carefully institute sustainable macroeconomic policies during extraordinary market sensitivity without provoking investors to retreat their capital to stronger markets.
Nations' inability to align interests and achieve international consensus on matters such as banking regulation has perpetuated the risk of future global financial catastrophes. The world experienced substantial changes in the late 19th century which created an environment favorable to an increase in and development of international financial centers.
Principal among such changes were unprecedented growth in capital flows and the resulting rapid financial center integration, as well as faster communication. BeforeLondon and Paris existed as the world's only prominent financial centers.Financial Conditions During the —91 and Recessions 3. Login or Register Information of interest. The Global Financial Stability Report provides quarterly assessments of global financial markets and addresses emerging market financing in a global context. Disclaimer Use the free Adobe Acrobat Reader to view pdf files. Corporate Bond Total Returns 2.
An array of smaller international financial centers became important as they found market nichessuch as AmsterdamBrusselsZurichand Geneva.
London remained the leading international financial center in the four decades leading up to World War I. The first modern wave of economic globalization began during the period of —, marked by transportation expansion, record levels of migrationenhanced communications, trade expansion, and growth in capital transfers. Most countries issuing passports did not require their carry, thus people could travel freely without them.
Europe itself experienced an influx of foreigners from togrowing from 0. While the absence of meaningful passport requirements allowed for free travel, migration on such an enormous scale would have been prohibitively difficult if not for technological advances in transportation, particularly the expansion of railway travel and the dominance of steam-powered boats over traditional sailing ships.
World railway mileage grew fromkilometers in tokilometers inwhile steamboat cargo tonnage surpassed that of sailboats in the s. Advancements such as the telephone and wireless telegraphy the precursor to radio revolutionized telecommunication by providing instantaneous communication. Inthe first transatlantic cable was laid beneath the ocean to connect London and New York, while Europe and Asia became connected through new landlines.
Economic globalization grew under free tradestarting in when the United Kingdom entered into a free trade agreement with France known as the Cobden—Chevalier Treaty. However, the golden age of this wave of globalization endured a return to protectionism between and InGerman Chancellor Otto von Bismarck introduced protective tariffs on agricultural and manufacturing goods, making Germany the first nation to institute new protective trade policies.
Despite these measures, international trade continued to grow without slowing. Paradoxically, foreign trade grew at a much faster rate during the protectionist phase of the first wave of globalization than during the free trade phase sparked by the United Kingdom. Unprecedented growth in foreign investment from the s to the s served as the core driver of financial globalization. In Octoberthe United States experienced a bank run on the Knickerbocker Trust Companyforcing the trust to close on October 23,provoking further reactions.
The panic was alleviated when U. Secretary of the Treasury George B. Cortelyou and John Pierpont "J. The bank run in New York led to a money market crunch which occurred simultaneously as demands for credit heightened from cereal and grain exporters. Since these demands could only be serviced through the purchase of substantial quantities of gold in London, the international markets became exposed to the crisis.
The Bank of England had to sustain an artificially high discount lending rate until Its inception drew influence from the Panic ofunderpinning legislators' hesitance in trusting individual investors, such as John Pierpont Morgan, to serve again as a lender of last resort. The system's design also considered the findings of the Pujo Committee 's investigation of the possibility of a money trust in which Wall Street 's concentration of influence over national financial matters was questioned and in which investment bankers were suspected of unusually deep involvement in the directorates of manufacturing corporations.
Although the committee's findings were inconclusive, the very possibility was enough to motivate support for the long-resisted notion of establishing a central bank.
The Federal Reserve's overarching aim was to become the sole lender of last resort and to resolve the inelasticity of the United States' money supply during significant shifts in money demand.
In addition to addressing the underlying issues that precipitated the international ramifications of the money market crunch, New York's banks were liberated from the need to maintain their own reserves and began undertaking greater risks.
New access to rediscount facilities enabled them to launch foreign branches, bolstering New York's rivalry with London's competitive discount market. Economists have referred to the onset of World War I as the end of an age of innocence for foreign exchange marketsas it was the first geopolitical conflict to have a destabilizing and paralyzing impact.
In the weeks prior, the foreign exchange market in London was the first to exhibit distress. European tensions and increasing political uncertainty motivated investors to chase liquidityprompting commercial banks to borrow heavily from London's discount market. As the money market tightened, discount lenders began rediscounting their reserves at the Bank of England rather than discounting new pounds sterling.
As foreign investors resorted to buying pounds for remittance to London just to pay off their newly maturing securitiesthe sudden demand for pounds led the pound to appreciate beyond its gold value against most major currencies, yet sharply depreciate against the French franc after French banks began liquidating their London accounts.
Emergency measures were introduced in the form of moratoria and extended bank holidaysbut to no effect as financial contracts became informally unable to be negotiated and export embargoes thwarted gold shipments.
A week later, the Bank of England began to address the deadlock in the foreign exchange markets by establishing a new channel for transatlantic payments whereby participants could make remittance payments to the Global Financial Stability Report March 2002 Market Developments And Issues World Economic And Finan. However, pound sterling liquidity ultimately did not improve due to inadequate relief for merchant banks receiving sterling bills.
As the pound sterling was the world's reserve currency and leading vehicle currencymarket illiquidity and merchant banks' hesitance to accept sterling bills left currency markets paralyzed. The U. By mid-October, the London market began functioning properly as a result of the September measures. The war continued to present unfavorable circumstances for the foreign exchange market, such as the London Stock Exchange 's prolonged closure, the redirection of economic resources to support a transition from producing exports to producing military armamentsand myriad disruptions of freight and mail.
The pound sterling enjoyed general stability throughout World War I, in large part due to various steps taken by the U. Such measures included open market interventions on foreign exchange, borrowing in foreign currencies rather than in pounds sterling to finance war activities, outbound capital controls, and limited import restrictions. The principal purposes of the BIS were to manage the scheduled payment of Germany's reparations imposed by the Treaty of Versailles inand to function as a bank for central banks around the world.
Nations may hold a portion of their reserves as deposits with the institution. It also serves as a forum for central bank cooperation and research on international monetary and financial matters. The BIS also operates as a general trustee and facilitator of financial settlements between nations. Twenty-five trading partners responded in kind by introducing new tariffs on a wide range of U.
Hoover was pressured and compelled to adhere to the Republican Party 's platform, which sought protective tariffs to alleviate market pressures on the nation's struggling agribusinesses and reduce the domestic unemployment rate. The culmination of the Stock Market Crash of and the onset of the Great Depression heightened fears, further pressuring Hoover to act on protective policies against the advice of Henry Ford and over 1, economists who protested by calling for a veto of the act.
The classical gold standard was established in by the United Kingdom as the Bank of England enabled redemption of its banknotes for gold bullion.
France, Germany, the United States, Russiaand Japan each embraced the standard one by one from tomarking its international acceptance. The first departure from the standard occurred in August when these nations erected trade embargoes on gold exports and suspended redemption of gold for banknotes.
Having informally departed from the standard, most currencies were freed from exchange rate fixing and allowed to float.
Most countries throughout this period sought to gain national advantages and bolster exports by depreciating their currency values to predatory levels.
A number of countries, including the United States, made unenthusiastic and uncoordinated attempts to restore the former gold standard. The early years of the Great Depression brought about bank runs in the United States, Austria, and Germany, which placed pressures on gold reserves in the United Kingdom to such a degree that the gold standard became unsustainable.
Germany became the first nation to formally abandon the post-World War I gold standard when the Dresdner Bank implemented foreign exchange controls and announced bankruptcy on July 15, In Septemberthe United Kingdom allowed the pound sterling to float freely.
By the end ofa host of countries including Austria, Canada, Japan, and Sweden abandoned gold. Following widespread bank failures and a hemorrhaging of gold reserves, the United States broke free of the gold standard in April The disastrous effects of the Smoot—Hawley tariff proved difficult for Herbert Hoover's re-election campaign.
Franklin D. Roosevelt became the 32nd U. As an alternative to cutting tariffs across all imports, Democrats advocated for trade reciprocity. Congress passed the Reciprocal Trade Agreements Act inaimed at restoring global trade and reducing unemployment.
The legislation expressly authorized President Roosevelt to negotiate bilateral trade agreements and reduce tariffs considerably. If a country agreed to cut tariffs on certain commodities, the U. Between andthe U. The legislation contained an important most-favored-nation clause, through which tariffs were equalized to all countries, such that trade agreements would not result in preferential or discriminatory tariff rates with certain countries on any particular import, due to the difficulties and inefficiencies associated with differential tariff rates.
The clause effectively generalized tariff reductions from bilateral trade agreements, ultimately reducing worldwide tariff rates. As the inception of the United Nations as an intergovernmental entity slowly began formalizing indelegates from 44 of its early member states met at a hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conferencenow commonly referred to as the Bretton Woods conference.
Delegates remained cognizant of the effects of the Great Depression, struggles to sustain the international gold standard during the s, and related market instabilities.
Whereas previous discourse on the international monetary system focused on fixed versus floating exchange rates, Bretton Woods delegates favored pegged exchange rates for their flexibility.
Under this system, nations would peg their exchange rates to the U. Rather than maintaining fixed rates, nations would peg their currencies to the U.