The central question addressed in Financial Innovations and the Welfare of Nations is how the transfer of financial innovations from developed to developing economies can nurture the dynamics of emerging capital markets. National capital markets can be positioned along a continuum ranging from embryonic to mature and emerged markets according to a decreasing "national cost of capital" criterion. In the introductory chapter Laurent Jacque argues that newly emerging countries are handicapped by a high cost of capital due to "incomplete" and inefficient financial markets. As capital markets graduate to higher level of "emergedness", their national firms avail themselves of a lower cost of capital that makes them more competitive in the global economy and spurs economic growth. Skillful transfer of financial innovations to emerging markets often encourages the deregulation of the country's financial services sector. This results into new conduits for a more efficient capital allocation process such as commercial paper, securitized consumer finance and other disintermediated modes of financing which out-compete traditional financial intermediaries (mostly commercial banks), reduce households' cost of living and conjointly fuel the dynamics of emerging markets. Our response to the central question of how the transfer of financial innovations can enhance the Wealth of Nations is to show that it reduces the cost of capital while not unduly increasing systemic risk. Part I examines the relationship between financial innovations and systemic risk of the international financial system.
Acknowledgements. Preface. Financial Innovations and the Dynamics of Emerging Capital Markets; L.L. Jacque. Part I: Financial Innovations and Systemic Risk. Fads and Fashions in the Policy Response to Financial Market Crises; A. Persaud. Towards a Global Financial Architecture; P. Christoffersen, V. Errunza. The New Capital Adequacy Framework and the Need for Consistent Risk Measures for Financial Institutions; M. Crouhy, D. Galai, R. Mark. Systemic Risk; S.A.C. Gould, S.A. Naftilan, S.J. Khoury, D.J. Wright. Part II: Financial Innovations and Capital Market Integration. The Secondary Market for Latin American Debt; R. Grosse. The Role of American Depositary Receipts in the Development of Emerging Markets; A. Moel. Screening for Blue-Chip Potential during the `Genesis' of Equity Markets; O.S. Kratz. Privatization and Business Valuation in Transition Economies; R. Aggarwal, J.T. Harper. Part III: International Securitization Innovations. Cross-Border Securitization; T. Frankel. A Tale of Two Citis; P.M. Vaaler. The Promise and Limits of Financial Engineering in Emerging Markets; C.A. Hill. Engineering a Way around the Sovereign Ceiling; A. Zissu, C. Stone. Chargeurs Wool: A Case Study in Securitization; A. Hyafil. Part IV: Financial Derivatives Innovations. Insurance: From Underwriting to Derivatives; E. Briys, F. de Varenne. Insurance Derivatives; M.S. Canter, J.B. Cole, R.L. Sandor. Credit Derivatives and Emerging Markets; R. Neal. Contributors. Index.
Über den Autor
Laurent L. Jacque is a Professor of International Finance and Banking and Director of the Program of International Business Relations at the Fletcher School (Tufts University). He is also Professor of Finance and International Business at the HEC School of Management (France).
Paul M. Vaaler is Assistant Professor of International Business, and Director of the Hitachi Center for Technology and International Affairs at the Fletcher School (Tufts University).
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