Banco Central de ChileRevista Economía Chilena
Published Issues
Volume 2 Nº 2 August 1999
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| Inter)National Financial Architecture: the Role of (Self)Regulation Leonardo Hernández T. The crises in Asia, Russia, and Brazil have shown the pitfalls of the international monetary system as well as financial sector weaknesses in the crisis economies. Many proposals to redesign the international financial architecture have been put forward in response to the worldwide crisis. They range from closing down the multilateral financial institutions to reshaping them as an international lender of last resort, and include imposing restrictions on capital inflows. This paper reviews recent evidence and concludes that the ultimate cause of financial crises lays within domestic economies and is unrelated to the process of financial integration and associated capital inflows. To deal with these problems countries should focus on strengthening their domestic financial institutions and the institutional framework in which they operate. However, this must be done using market-friendly mechanisms and not old-fashioned inflexible rules. As a result self-regulation and market discipline will be enhanced and a more solid financial sector will emerge. The same principle applies to the institutions that comprise the new international financial architecture. |
| Assessment of Banking System Fragility During non-crisis Periods: Chile 1990 -1998 Antonio Ahumada C. / Carlos Budnevich L. Identification of bank fragility is the motivation of a large literature. Its purpose is to provide early warning signals for prompt corrective action by bank supervisors. This paper reviews the literature and explores some definitions of fragility for the Chilean case. Non-performing loans and the interbank spread are used as tentative measures of fragility. Bank financial ratios that reflect bank performance and macroeconomic variables comprise the set of explanatory variables. The results suggest that the level of capital, loans growth, and market interest rates are important determinants of differences in non-performing loans across banks. However, interbank spreads are only sensitive to macroeconomic variables |
| Asset Prices in Chile: Arbitrage and Bubbles Raphael Bergoeing / Felipe Morandé / Raimundo Soto This article presents evidence on the main empirical regularities exhibited by the prices of real asset prices in Chile during the last twenty years. By using a dynamic error-correction model, tests are performed on long-run arbitrage conditions between the prices of different assets (land, real estate, and stocks) and short-run relationships between asset prices and exogenous policy and idiosyncratic variables. The presence of "bubbles" that is, the phenomenon in which asset prices depart from what is explained by their fundamentals - is also tested for the last decade. Finally, by running some counterfactual exercises, the impact of different macro policies on asset price trajectories is simulated. However one should be cautious in interpreting the simulation results, as the main objectives of macro policies may have not been to influence asset prices in any direction but rather to achieve more global aims |
| Books review |
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Inflation, Unemployment and Monetary Policy por Robert M. Solow y John B. Taylor Facing up to Inequality in Latin America: 1998 - 1999 Report Inter-American Development Bank |
| Publications Review |