This paper identifies two alternative forms of prudential regulation. The first set is formed by regulations that directly control financial aggregates, such as liquidity expansion and credit growth. An example is capital requirements as currently incorporated in internationally accepted...

The depth of and access to financial services provided by banks throughout Latin America are extremely low in spite of its recognized importance for economic activity, employment and poverty alleviation. Low financial depth and access hurts the poor the most and is due to a variety of obstacles...

After more than a decade of financial sector liberalization, both of domestic markets and of international financial transactions (capital account liberalization), policymakers in many developing countries remain concerned about the effects that large and highly volatile capital flows have on...

This paper argues that the experiences with banking crises in Latin America have been different from those in the industrial world because of the peculiarities of Latin American financial systems. Hence, applying the lessons derived from crisis resolution in the industrial world is not...

This paper examines the persistence of currency substitution in two of the most dollarized countries in Latin America, Bolivia and Peru. Currency substitution is related not only to the expected rate of depreciation but also to deprecia- tion risk, proxied by transformations of the conditional...

A common argument against monetary stabilization policies in developing countries is that they lead to short-run output contractions. This paper shows that, in economies facing financial constraints, such results only need to hold in a fixed exchange rate system. Under flexible exchange rates,...

The risks of large capital losses on the domestic assets of developing countries resulting from expropriation, inflation, or devaluations are identified as the major causes of capital flight. The combination of large foreign loans and capital flight from developing countries during the 1970s and...

This paper reviews the experience with capital controls in industrial and developing countries, considers the policy issues raised when the effectiveness of capital controls diminishes, examines the medium-term benefits and costs of an open capital account, and analyzes the policy measures that...

This paper associates both the increase in risk taken by wholesale banks in the United States and the decline in earnings at wholesale banks in Japan with a reduction in the franchise value of wholesale banking. In contrast with the conventional view that relates the franchise value of banking...

This paper builds a multiperiod, general equilibrium framework for analyzing the macroeconomic effects of financial reforms in developing countries and the costs of maintaining official safety nets under the financial system during such reforms.While a financial liberalization yields efficiency...