Other Titles in this Series



World Economic
and Financial Surveys

    WORLD ECONOMIC AND FINANCIAL SURVEYS
  International Capital Markets
   Developments, Prospects, and Key Policy Issues
                   November 1997

By an IMF Staff Team led by David Folkerts-Landau
with Donald J. Mathieson and Garry J. Schinasi

1997 International Monetary Fund
Ordering Information

The International Capital Markets Report ceased publication in August 2001. Both the Report and the Emerging Market Financing quarterly (published 2000-2001) have been replaced by a new quarterly, The Global Financial Stability Report. The new report was created to provide timely and comprehensive coverage of both mature and emerging financial markets as part of the IMF's stepped up tracking of financial markets.

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Contents
  Preface
  List of Abbreviations

45k pdf file   I. Introduction

193k pdf
file
II. Developments and Trends in the Mature Markets
Foreign Exchange Markets: Capital Flows and the Rise of the Dollar
Credit Markets: Spread Compression and Increased Volumes
Risks in Foreign Exchange and Credit Markets
Equity Markets
Expanding and Maturing Derivative Markets
Appendix: Market Surprised by Yen's Appreciation in May 1997

34k pdf file III. EMU: Systemic Implications and Challenges
Global Financial Adjustments After Introduction of the Euro
EMU and the Potential Benefits of Europe-Wide Securities Markets
Consolidation and Restructuring of European Banking Systems
Systemic Risk Management in EMU

76k pdf file IV. Developments and Prospects in Emerging Markets
Capital Flows to Emerging Markets
Performance of Emerging Debt and Equity Markets
Sustainability of Capital Flows and Speculative Attacks
Appendix 1: Sovereign Ratings and Fundamentals
Appendix 2: Mechanics of Speculative Attacks

28k pdf file V. External Liability Management

35k pdf file VI. Developments in International Banking
Industrial Countries
Banking System Developments in Emerging Markets

58k pdf file VII. Emerging Market Currency Crises of July 1997

30k pdf file VIII.  Conclusions
Mature Markets
Structural Aspects of EMU
Emerging Markets
External Liability Management
Developments in International Banking

Background Material--Part I
Recent Developments and Trends in Capital Markets and Banking Systems

 
Annexes
 
329k pdf
file
I. Recent Developments in Emerging Capital Markets
Capital Flows, Reserves, and Foreign Exchange Markets
Bond Markets
Equity Markets
Mutual Funds
International Bank Lending

522k pdf
file
II. Developments and Trends in the Mature Capital Markets
Exchange Rates
Bond Markets
International Syndicated Loan Markets
Equity Markets
Derivative Markets
Developments in Systemic Risk Management
Appendix 1: Extracting Information from Options Prices
Appendix 2: Have Securities Markets Become More Volatile?
Appendix 3: Current U.S. Equity Prices Compared with the 1987 U.S. and 1989 Japanese Bubbles

160k pdf
file
III. Developments in International Banking
Restructuring and Consolidation of International Banking Systems
Supervisory and Regulatory Developments
Developments in Profitability and Asset Quality in Selected Industrial Countries
Banking System Developments in Selected Emerging Markets
Appendix 1: Credit Derivatives
Appendix 2: Accounting for Nonperforming Loans

Background Material--Part II
Selected Issues

 
190k pdf
file
IV. European Monetary Union: Institutional Framework for Financial Policies and Structural Implications
Potential Size of EMU Financial Markets
Institutional Framework for Financial Markets
Euro as a Catalyst: Incentives for Continued Structural Change
Structural Implications for Securities Markets: Further Securitization of European Finance
Structural Implications for Banking Systems
Appendix: Remaining Impediments to Cross-Border Competition

87k pdf file V. Risk Management of Sovereign Liabilities
Foreign Currency Exposure of Sovereign Liabilities
Institutional Framework
Strategic Management of Sovereign Liabilities
Deviations from the Benchmark Portfolio
Conclusion

95k pdf file VI. Capital Flows to Emerging Markets--A Historical Perspective
Earlier Periods of High Capital Mobility
International Capital Flows After the First Oil Shock
Factors Stimulating Capital Flows and Renewed Market Access in the 1990s
Appendix 1: Determinants of Balance of Payments and Banking Crises
Appendix 2: Speculative Attacks in the 1990s: Have Economic Models Got It Right Yet?

33k pdf file Statistical Appendix

37k pdf file References

91k pdf file Boxes

Chapter

IV.
  1. Building a Resilient Financial System in Hong Kong, China
Annexes
I.
  1. The Brady Bond Market Comes of Age
  2. Repackaged Brady Bonds
  3. Emerging Market Currency Eurobonds: The Eurorand Market
II.
  1. Trends in Fund Management
  2. Circuit Breakers
IV.
  1. ERM 2
  2. Volatility and Correlation of Asset Returns in EMU
VI.
  1. Liberalization of Capital Controls in Emerging Markets

369k pdf
file
Tables

Chapters

II.
  1. Net Foreign Purchases of U.S. Bonds
  2. Net Purchases of Domestic Bonds by Nonresidents
  3. United States: International Transactions
  4. One-Year Interest Differentials with Germany, February 28, 1995, January 30, 1997, and May 31, 1997
  5. Domestic and International Debt Securities: Amounts Outstanding and Net Issues
  6. Announced International Syndicated Credit Facilities by Nationality of Borrowers
  7. Average Spreads and Maturities on Eurocredits
  8. Major Industrial Countries: Equity Market Risk-Adjusted Returns in Local Currency (Sharpe Ratios)
  9. Markets for Selected Derivative Financial Instruments: Notional Principal Amounts Outstanding
  10. Notional Principal Value of Outstanding Interest Rate and Currency Swaps
III.
  1. Total Foreign Exchange Reserves Minus Gold in Selected Countries and Regions
  2. European Union (EU), North America, and Japan: Selected Indicators of the Size of the Capital Markets, 1995
IV.
  1. Private Capital Flows to Emerging Markets
  2. Emerging Market Total Return Equity and Debt Indices
Annexes
I.
  1. Secondary Market Transactions in Debt Instruments of Emerging Markets
  2. Emerging Market Bond Issues, Equity Issues, and Syndicated Loan Commitments
  3. Emerging Market Bond Issues: Fixed-Rate, Floating-Rate, and Call Options
  4. Emerging Market International Bond Issues by Currency of Denomination
  5. Stock Market Turnover Ratio and Value of New Equity Issues in Selected Countries and Regions
  6. Emerging Market Medium- and Long-Term Syndicated Loan Commitments: Interest Margins and Refinancings
  7. Changes in Net Assets of BIS-Reporting Banks vis--vis Banks in Selected Countries and Regions
II.
  1. United States: Selected External Account Variables
  2. Major Industrial Countries: Bond and Equity Index Returns
  3. One-Year and Seven-Year Interest Differentials with Germany, February 28, 1995, January 1, 1996, January 30, 1997, and May 31, 1997
  4. Outstanding Amounts of International Debt Securities
  5. Outstanding Amounts and Net Issues of International Debt Securities by Currency of Issue
  6. Changes in Net Assets of BIS-Reporting Banks vis--vis Banks in Selected Countries and Regions
  7. United States: Outstanding Repurchase Agreements (Repos)
  8. U.S. Mutual Funds: Net New Cash Flow and Total Assets
III.
  1. Bank Financial Strength Ratings for Selected Countries, June 2, 1997
  2. Disintermediation in Selected Industrial Countries
  3. Japan and the United States: Summary of Prompt Corrective Action Provisions
  4. Major Industrial Countries: Commercial Bank Profitability
  5. Selected Asian Property Markets: Vacancy Rates and Changes in Rents
  6. Loan Classification in Selected Emerging Markets
IV.
  1. Amounts Outstanding of International Debt Securities by Currency and Country of Nationality, March 1997
  2. Use of Selected Currencies on One Side of Foreign Exchange Transaction, April 1989, April 1992, and April 1995
  3. Notional Principal Value of Outstanding and New Interest Rate and Currency Swaps, 1995
  4. European System of Central Banks: Open Market Operations and Standing Facilities
  5. European System of Central Banks: Eligible Assets
  6. Key Monetary Policy Operating Procedures in Industrial Countries and in the European Central Bank
  7. Monetary and Supervisory Agencies
  8. Deposit Insurance Schemes for Commercial Banks in the European Union and G-10 Countries, 1995
  9. Permissible Banking Activities and Bank Ownership in the European Union and G-10 Countries, 1995
  10. List of Bank Activities Subject to Mutual Recognition in the European Union
  11. Components of Capital for Meeting the Capital Standards or Requirements in the European Union and G-10 Countries
  12. Commercial Bank Supervisory Practices in the European Union and G-10 Countries, 1995
  13. Mutual Funds, June 1996
  14. European Union: Cross-Border Interbank Assets
  15. European Union: Ratings of Foreign and Local Currency Debt of Sovereign Governments, May 29, 1997
  16. European Union Countries, North America, and Japan: Foreign Currency Debt, 1996
  17. Estimates of Credit Spreads of EU Sovereigns, September 1996 and June 1997
  18. Interest Rate Spreads of Canadian Provinces
  19. Euro Benchmark Yield Curve: Germany vs. France
  20. Funds Raised in Capital Markets by Nonfinancial Enterprises in Selected Industrial Countries, 1990-95
  21. European Union Countries, United States, and Japan: Equity Markets, 1996
  22. Bank Restructuring: Number of Institutions and Size Concentration
  23. European Union Countries, North America, and Japan: Population per Bank Branch
  24. Mergers and Acquisition Activity in Banking
  25. European Union: Net Interest Margins
  26. European Union: Bank Profitability
  27. Implementation of the European Union Capital Adequacy and Investment Services Directives
  28. Regulatory Constraints on Portfolio Investment of Institutional Investors in Selected Industrial Countries
V.
  1. Long-Term Public and Publicly Guaranteed External Debt Outstanding and Reserves Excluding Gold in Selected Developing Countries, 1995
  2. External Debt Profile of Selected Asian Countries, 1995
  3. Institutional Structure of Debt Offices in OECD Countries: Debt Offices Within the Treasury
  4. Institutional Structure of Debt Offices in OECD Countries: Autonomous Debt Offices
  5. Institutional Structure of Debt Offices in OECD Countries: Debt Offices Within the Central Bank
  6. Institutional Structure of Debt Offices in OECD Countries: Debt Offices Within the Ministry of Finance
VI.
  1. Selected Crises, 1870-1914
  2. External Financial Resources to Developing Countries
  3. Moody's Initial Ratings of Emerging Markets Countries
  4. Performance of Crises Indicators
Statistical Appendix
     A1.  Merrill Lynch Global Investor Survey
     A2.  Net Foreign Purchases of U.S. Bonds
     A3.  Net Purchases of Securities in Major Industrial Countries
     A4.  External Positions of Banks in Individual Reporting Countries
     A5.  Annual Turnover in Derivative Financial Instruments Traded
             on Organized Exchanges Worldwide
     A6.  New Interest Rate and Currency Swaps
     A7.  Currency Composition of Notional Principal Value of
             Outstanding Interest Rate and Currency Swaps

972k pdf
file
Figures

Chapters

II.
  1. Spot Exchange Rates
  2. United States, Japan, and Germany: Interest Rate Differentials
  3. Major European Countries: Exchange Rates vs. Deutsche Mark
  4. Implied Volatility: Japanese Yen and Deutsche Mark Three-Month Forwards
  5. Selected European Long-Term Interest Rate Differentials with Germany
  6. United States: Yield Spreads of Corporate Bonds over U.S. Treasuries
  7. Australia, Canada, and New Zealand: Yield Differentials on 10-Year Government Bonds
  8. Stock Market Indices: Major Industrial Countries
  9. Stock Market Indices: Smaller European Countries
  10. United States: Equity Market Performance
IV.
  1. Distribution for Yen-Dollar Exchange Rate in Early September 1997 Implied by Options Prices on May 5, 9, and 19, 1997
  2. Private Market Financing for Emerging Markets
V.
  1. Yield Spreads: Emerging Market and High-Yield U.S. Corporate Bonds
  2. Emerging Markets: Sovereign Ratings and Fundamentals
  3. Bank Receipts and Payments Arising from Forward Contract Operations
  4. External Long-Term Public and Publicly Guaranteed Debt Outstanding
VII.
  1. Thailand: Selected Financial Indicators
  2. Financial Market Developments in Selected Asian Countries, 1997
  3. Financial Market Developments in Selected Latin American Countries, 1997
  4. Yield Curves in Selected Emerging Markets, July 1997
Annexes
I.
  1. Net Private Capital Flows to Emerging Markets
  2. Total Reserves Minus Gold of Selected Emerging Markets, January 1990-May 1997
  3. Exchange Rates of Selected Emerging Markets, January 1990-May 1997
  4. Bond Markets: Selected Returns, Yields, and Spreads
  5. Yield Spreads for Selected Brady Bonds and U.S. Dollar-Denominated Eurobonds
  6. Emerging Market Debt: Volatility and Correlation of Returns with Mature Markets
  7. Brady and Eurobond Spreads
  8. Spreads and Maturities for Sovereign Borrowers
  9. Emerging Equity Markets: Selected Returns, Price-Earnings Ratios, and Expected Returns
  10. Emerging Equity Markets: Selected Volatilities, Return-Volatility Comparisons, and Correlations
  11. Emerging Market Mutual Funds
II.
  1. Major Industrial Countries: Exchange Rates, January 1994-May 1997
  2. Major European Countries: Local Currency vs. Deutsche Mark, January 1994-May 1997
  3. Major Industrial Countries: Real Growth in Broad Money Supply and Claims on Private Sector
  4. Major Industrial Countries: Short-Term Interest Rates
  5. Major Industrial Countries: Long-Term Interest Rates
  6. Bilateral Exchange Rates and Short-Term and Long-Term Interest Differentials vis--vis the U.S. Dollar
  7. Foreign and International Holdings of U.S. Public Debt
  8. RiskMetrics Daily Price Volatility for U.S. Dollar Spot Exchange Rates, January 19, 1995-May 30, 1997
  9. Implied Volatility: Yen and Deutsche Mark Three-Month Forwards
  10. Selected European Long-Term Interest Rate Differentials with Germany
  11. Yield Differential for the 10-Year Government Bonds of Australia, Canada, and New Zealand
  12. United States: Yield Spreads of Corporate Bonds over U.S. Treasuries
  13. RiskMetrics Daily Price Volatility for 10-Year Government Bonds, January 19, 1995-May 30, 1997
  14. Spreads on Eurocredits
  15. Major Industrial Countries: Stock Market Indices
  16. United States: Corporate Profits and Market Capitalization
  17. United States: Corporate Profits Volatility
  18. Implied Volatility: S&P 500, Nikkei 225, and DAX Indices
  19. Distribution for Yen/Dollar Exchange Rate in Early September 1997 Implied by Options Prices on May 20, 1997
  20. Historical Stock and Bond Price Volatility in the United States, Japan, and Germany
  21. United States and Japan: Developments in Equity, Bond, and Money Markets Surrounding Significant Stock Market Increases
III.
  1. Major Industrial Countries: Intemediation Spreads
IV.
  1. Cross-Border Target Payment
  2. Labor Costs and Productivity in Banking, 1994
V.
  1. External Long-Term Public and Publicly Guaranteed Debt Outstanding
VI.
  1. Capital Mobility Index
  2. Net Capital Outflows, 1880-1913
  3. Net Capital Inflows, 1880-1913
  4. Contributions of Capital Flows to Investment, 1870-1914 versus 1980-90s
Box
9.
    Capital Controls in and Flows to Emerging Markets