In this paper it is argued that neither the earlier Phillips type of fixed-coefficient or temporary equilibrium models nor the recent Tobin type of portfolio equilibrium models of the money supply process capture the money and credit creating potential of external financial markets. A partial...

The finding that countries' investment rates are highly correlated with their national saving rates has been confirmed by many studies. Our interpretation of the saving-investment evidence is that the hypothesis of a high degree of substitutability for claims on physical capital located in...

This paper analyzes the economic determinants of developing country creditworthiness indicators for over 60 developing countries for the period from 1980 to 1993. Our results indicate that economic fundamentals--the ratio of nongold foreign exchange reserves to imports, the ratio of the current...

In recent years, some countries have adopted stabilization programs that have included the preannouncement of the future path of the exchange rate. This paper considers the circumstances under which the preannouncement of exchange rate changes helps to generate an adjustment process that results...

The paper addresses the problem of establishing monetary control in financial systems with insolvent institutions. In particular, it examines the potential adverse selection, moral hazard, and collusion problems that can arise if indirect, auction-based monetary control systems are used in this...

A number of economists have argued that, in order to understand recent exchange rate movements, one must examine the process by which exchange rate expectations are formulated. To describe the influence of exchange rate expectations on the adjustment process, this paper examines a small, open...

This paper examines the problems involved in estimating portfolio balance models of the behavior of financial markets during a period of extensive structural reforms. The model encompasses specifications of the portfolio behavior of banks and nonbanks (firms and households) regarding holdings of...

Determinants of the currency composition of foreign exchange reserves are examined for both industrial and developing countries. Empirical results indicate that the currency composition of reserves during the period 1976-85 has been influenced by each country's exchange rate arrangements, trade...

Several developing countries have found that a combination of exchange rate and financial reform can result in capital inflows that make it difficult, if not impossible, for the authorities to control the growth of monetary aggregates. This paper examines how financial reform can be integrated...