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Evolving international financial markets: some implications for Central Banks

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  • William R. White

Abstract

Internationally integrated capital markets can have significant effects on the way central bankers pursue both monetary (macroeconomic) and financial stability. With respect to the former, countries are being pushed into corner solutions of either "immutably" fixed exchange rates or floating. While the proper choice depends on a country's circumstances, no regime is without its own problems. In this paper, some of the practical implications of floating are highlighted; in particular, how adoption of such a regime affects the transmission mechanism of monetary policy and the problems posed by volatile exchange rate expectations. As for the pursuit of financial stability, central bankers and other regulators must increasingly recognise the international dimension in their efforts to promote the health of financial institutions, financial markets and the infrastructure (legal, payment systems, etc.) which supports them. This international dimension affects the nature of the prudential policies adopted as well as the processes through which they are agreed. Finally, recognising that monetary stability and financial stability are two sides of the same coin (witness Mexico in 1995 and South Asia more recently), the paper concludes with some preliminary reflections on possible interactions between monetary and prudential policies in an internationally integrated world.

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  • William R. White, 1999. "Evolving international financial markets: some implications for Central Banks," BIS Working Papers 66, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:66
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    Cited by:

    1. William R. White, 2000. "What have we learned from recent financial crises and policy responses?," BIS Working Papers 84, Bank for International Settlements.
    2. Yu, Wusheng & Frandsen, Søren E., 2002. "China's WTO Commitments in Agriculture: Does the Impact Depend on OECD Agricultural Policies?," Conference papers 331016, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Ghosh, Saibal, 2001. "Financial Stability and Public Policy: An Overview," MPRA Paper 19757, University Library of Munich, Germany.
    4. William R. White, 2000. "Recent initiatives to improve the regulation and supervision of private capital flows," BIS Working Papers 92, Bank for International Settlements.

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