This paper explores some anomalies in the foreign exchange market. It is hard to find evidence of either short-term overshooting or of longer-term reversion to an equilibrium. The forward exchange rate contains virtually no information on future spot rates. Discussions with practitioners...

The second half of August 1998 was dominated by two events. From 14 to 28 August, the Hong Kong Monetary Authority (HKMA) intervened in Hong Kong equity markets to prevent a speculative double play against their currency board. On 17 August, Russia announced its default on sovereign bonds. This...

The paper investigates whether monetary policy and banking supervision should be separated. The main argument for separation is that the combination of functions might lead to a conflict of interest. An argument against is that separation is inconsistent with the central bank's concern for the...

This paper sets out a tractable model which illuminates problems relating to individual bank behaviour, to possible contagious inter-relationships between banks, and to the appropriate design of prudential requirements and incentives to limit ‘excessive’ risk-taking. Our model is rich enough...

This paper looks at the effect of monetary policy changes on asset prices in the foreign exchange and equity markets of Brazil and Korea. We were searching for evidence whether monetary policy tightening may have had (adverse) counterproductive effects on such asset markets. In common with other...

Bank equity capital can play several roles; for example as a buffer against (unexpected) loss, as protection for other creditors in bankruptcy, and as ‘skin in the game’. There was never sufficient discussion of which role(s) the BCBS capital adequacy requirements (CARs) were meant to play,...