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34031. A Guide to Choosing Absolute Bank Capital Requirements

Author:
Mark Carey
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Resampling implementation of a stress-scenario approach to estimating portfolio default loss distributions is proposed as the basis for estimates of the appropriate absolute level of economic capital allocations for portfolio credit risk. Estimates are presented for stress scenarios of varying severity. Implications of use of different analysis time horizons are analyzed. Results for a numeraire portfolio are quite sensitive to such variations. Although the analysis is framed in terms of recent proposals to revise regulatory capital requirements for banks, the arguments and results are also relevant for bankers making capital structure decisions.
Topic:
Economics and International Trade and Finance
Political Geography:
United States

34032. To What Extent Will the Banking Industry be Globalized? A Study of Bank Nationality and Reach in 20 European Nations

Author:
David C. Smith, Allen N. Berger, Qinglei Dai, and Steven Ongena
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We model two dimensions of bank globalization – bank nationality (a bank from the firm's host nation, its home nation, or a third nation) and bank reach (a global, regional, or local bank) using a two-stage nested multinomial logit model. Our data set includes over 2,000 foreign affiliates of multinational corporations operating in 20 European nations. We find that these firms frequently use host nation banks for cash management services, and that bank reach may be strongly influenced by this choice of bank nationality. Our results suggest limits to the degree of future bank globalization.
Topic:
Economics, Globalization, and International Trade and Finance
Political Geography:
United States

34033. Resolving Conflicts In The Caucasus And Moldova: Perspectives On Next Steps

Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
On 6-7 May 2002, the National Intelligence Council and the Department of State's Bureau of Intelligence and Research sponsored a conference that examined the prospects for resolving regional conflicts involving four states of the former Soviet Union: Georgia, Armenia, Azerbaijan, and Moldova. The conference brought together outside scholars, regional experts and officials to discuss the conflicts in Abkhazia, South Ossetia, Nagorno-Karabakh, and Transnistria. The purpose was not to arrive at a consensus but to deepen understanding of the complex geopolitical dynamics at work in the region.
Topic:
Conflict Resolution, International Relations, and Peace Studies
Political Geography:
Moldova, Eastern Europe, Armenia, Azerbaijan, Georgia, South Ossetia, and Abkhazia

34034. The Defense Science Board Summer Study on Defense Science and Technology

Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Technology has been and must continue to be a key enabler of military advantage, both in conflict and in situations where conflict is close at hand. Over the years, the Department of Defense (DoD) science and technology progrme has discovered, invented, harnessed, and demonstrated such enabling technologies. As industry becomes more global, as scientific endeavors in other countries become more competitive, and as affordable technology increasingly issues from commercial sources, the DoD science and technology program needs to continue to meet challenges and exploit opportunities that arise. The Defense Science Board 2001 Summer Study task force has asked to examine three aspects of the DoD science and technology program: How the Department's S investment should be spend. The level of investment in science and technology. How the military can realize the most value from this investment.
Topic:
Defense Policy, Industrial Policy, and Science and Technology
Political Geography:
United States

34035. Third Annual Report

Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The U.S. Commission on International Religious Freedom (the Commission or USCIRF) is the first government commission in the world with the sole mission of reviewing and making policy recommendations on the facts and circumstances of religious freedom violations abroad. The Commission's impact and its success in accomplishing its mission are dependent on bringing advice and accountability to U.S. foreign policy in its promotion of international religious freedom. By providing reliable information and analysis, and careful and creative policy recommendations, the Commission provides the U.S. government and the American public the tools necessary to promote this fundamental freedom throughout the world.
Topic:
Foreign Policy, Diplomacy, Human Rights, and Religion
Political Geography:
United States

34036. Report on Indonesia

Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Indonesia is a country in major transition. After 40 years of authoritarian rule, a fledgling democratic system has yet fully to take root. The country's first post - authoritarian president, Abdurrahman Wahid, was impeached after two years by the parliament on the grounds of incompetence and replaced by Megawati Sukarnoputri in July 2001. The economy, imbued with corruption during the decades of state control, collapsed in 1997 and has yet to recover. Accustomed to playing a central political and economic role, the Indonesian military remains reluctant to accept civilian control and accountability for its actions. The discontent of the people of several regions with incorporation into the Indonesian state was met for decades with harsh military repression, leaving the essential issues unsolved and, in some cases, aggravated.
Topic:
Foreign Policy, Diplomacy, Human Rights, and Religion
Political Geography:
United States, Indonesia, and Southeast Asia

34037. Report on Uzbekistan

Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The conditions for religious freedom are very poor in Uzbekistan. In addition to a highly restrictive law on religion that severely limits the ability of minority religions to function, the Uzbek government in recent years has been harshly cracking down on Muslim individuals, groups, and mosques that do not conform to government-prescribed ideas on how the Islamic faith should be practiced and expressed. This crackdown has resulted in the arrests of thousands of persons and there are credible reports that many have been and continue to be tortured in detention, torture that in some cases has led to the death of those detained. While the government of Uzbekistan does face threats to its security from certain religious groups that have used violence against it, the government's mass arrests of religious believers and reports of torture nevertheless suggest that gravely troubling religious freedom violations are occurring in that country. The Commission recognizes that Uzbekistan only recently gained independence and has not yet developed the institutions and level of civil society necessary for the full protection of human rights, including religious freedom. Nevertheless, this neither excuses nor fully explains the scale and harshness of the government's current campaign against religious freedom.
Topic:
Foreign Policy, Diplomacy, Human Rights, and Religion
Political Geography:
United States, Asia, and Uzbekistan

34038. Equity Prices, Household Wealth, and Consumption Growth in Foreign Industrial Countries: Wealth Effects in the 1990s

Author:
Carol C. Bertaut
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Although most recent empirical research regarding the size and significance of the impact of changes in wealth on consumption has looked for such effects in the United States, equity prices in the 1990s rose considerably in most other industrial countries as well. This paper investigates the strength of the wealth effect across countries. Using a variety of methods, I find evidence of significant wealth effects in the United Kingdom and Canada of a size comparable to that in the United States, reflecting the importance of equities in aggregate household wealth in these countries. A significant wealth effect is also evident in Japan, but because household wealth has changed little on balance in Japan in recent years, this channel has been less important in explaining Japanese consumption growth in the second half of the 1990s. Despite a rapid appreciation in equity prices and an increase in equity ownership in the major continental European countries since 1995, equities remain a less important form of household wealth in most of these countries, and the consumption response to changes in wealth remains limited. However, in some smaller European countries where equity issuance is more common, the emerging evidence suggests that wealth effects may be more important.
Topic:
International Relations, Economics, Globalization, and International Trade and Finance
Political Geography:
United States, United Kingdom, Europe, and Canada

34039. International Coordination of Macroeconomic Policies: Still Alive in the New Millennium?

Author:
Joseph E. Gagnon, Dale W. Henderson, Brian M. Doyle, and Laurence H. Meyer
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In this paper we provide two building blocks for an analysis of international policy coordination: (1) a survey of models of policy coordination, and (2) an account of experience with policy coordination among the G-7 countries and within Europe since the breakdown of the Bretton Woods System. Using these building blocks, we investigate the correspondence between the models and experience and attempt to draw lessons for both the modelers and the practitioners. We find that the correspondence is close enough that the models help in analyzing several instances of actual policy coordination, but that the correspondence could be even closer. As for lessons for modelers, we suggest that they devote more attention to the analysis of information exchange, a key feature of practical policy coordination; to the coordination of different types of policies; to the ramifications of political divisions within countries; and to the implications of market irrationality and speculative bubbles. As for lessons for policy makers, we suggest that they give more consideration to the choice of their ultimate objectives, in particular to whether the current account should always be close to balance; to achieving better internal policies; and to the greater use of fiscal policy as a stabilization tool.
Topic:
International Relations, Economics, Globalization, and International Trade and Finance
Political Geography:
Europe

34040. Financial Centers and the Geography of Capital Flows

Author:
Francis E. Warnock and Chad Cleaver
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We examine an assumption common in empirical work on bilateral portfolio capital flows that the countries the flows are attributed to are also the countries of the security's issuer, seller, or ultimate buyer. We do this by estimating U.S. investors' holdings of debt and equities in over 40 countries and, for the same countries, foreign investors' holdings of U.S. debt and equities. A comparison of our estimates with data from benchmark surveys provides insight into U.S. data on international debt and equity transactions. We find that, contrary to the common assumption, the data do not track the location of U.S. investment or the location of investors in U.S. assets very well. Because the U.S. portfolio flow data collection system was designed to measure cross-border transactions with foreign counterparties who are often intermediaries, the majority of the flows are attributed to financial centers. By aggregating our country-level estimates, we find that U.S. data accurately portray net inflows into U.S. equities and net outflows into foreign bonds. However, the data substantially overcount net inflows into U.S. bonds and may undercount net outflows into foreign equities. We conclude with a discussion of the implications of our findings for research on capital flows.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States