The causal link between finance and growth is one of the most striking empirical macroeconomic relationships uncovered in the past decade. As this branch of the literature matures, the focus shifts from growth to other aspects of economic prosperity, and from financial depth to multidimensional...

De Nicol? Honohan, and Ize assess the benefits and risks associated with dollarization of the banking system. The authors provide novel empirical evidence on the determinants of dollarization, its role in promoting financial development, and on whether dollarization is associated with financial...

Analyzing new data, the authors find that the general trend toward increased use of foreign-currency-denominated bank deposits in emerging markets has continued, despite declines in a few countries. Their analysis of the new data suggests that a sizable fraction (about half, on average) of funds...

It has recently been proposed that banks be allowed to hold less capital against loans to borrowers who have received a favorable rating by an approved rating agency. But a plausible model of rating-agency behavior shows that this strategy could have perverse results, actually increasing the...

The term"excess liquidity"may refer to the share of liquid assets in bank portfolios (the result of a retrenchment in bank lending, or a"credit crunch") or to money holdings of the nonbank public. Excess liquidity may be voluntary or nonvoluntary. In response to excess liquidity, policymakers...

The recent Thai boom has been accomplished in an economy with considerable openness to external forces. Despite the fiscal correction achieved during 1986-89, the domestic demand expansion has made itself felt in a widening of the current account deficit. While this deficit partly reflects the...

This paper is about financial flows in developing countries. It reviews the evidence on who the borrowers and lenders are. Apart from collecting and summarizing available data from some seventeen countries, the paper presents the results of an econometric analysis of the interactions between the...

Enthusiasts for financial sector tax reform typically come either with some form of"flat tax"(including value added tax on financial services, zero taxation on capital income, or a universal transactions tax) or advocating corrective taxes designed to offset market failures or achieve other...

The authors examine why emerging markets, in particular, are susceptible to and affected by financial difficulties. They show that these difficulties have a richer, more complex structure than they are sometimes believed to have - with marked information asymmetries and substantial volatility....

Current issues in banking policy range from the need to construct basic institutions and incentive structures in transition economies, to the challenges posed by the increasingly complex interactions involved in contemporary banking. The authors of this report outline the basic regulatory...