Financial Markets and Institutions (2-downloads)

also securities

Financial intermediaries

adverse selection, 25–26

assets and liabilities of, 27t, 28t

asymmetric information, 25–27

contractual savings institutions, 27t, 29

debt contracts and, 150–51

depository institutions (banks), 

27t, 28–29

economic efficiency and, 27

economies of scale and, 24

ensuring soundness of, 32–33

expertise of, 139

functions of, 15, 22–27

insurance companies as, 513

in interest-rate swaps, 616

investment, 27t, 29–30

liquidity services, 24

moral hazard, 26–27

pension funds and, 513

principal-agent problem and, 147

risk sharing, 25

role of, 6, 144

as source of external funds, 135–36

transaction costs and, 22–24, 25,

138–39

types of, 27–30

Financial intermediation

adverse selection and, 142–44

decline of, 469–70

defined, 22

principal-agent problem and, 147

Financial liberalization, 164, 166

Financial markets

debt, 18

defined, 2

efficiency of, 116–32

equity, 18

functions of, 2, 8–9, 15–17

internationalization of, 20–22

models of, 9

primary, 18–19

secondary, 18–19

Index

I-9

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stability of, 234

structure of, 18–20

unexploited profit opportunities and,

119–20

Financial models, 9

Financial panics. See also bank panics

defined, 32

discount lending and, 227

lender of last resort and, 227–28

Financial service industries, 479–82

Financial Stability Oversight Council, 449

Financial statements, 159

Financial structure

asymmetric information and, 139–40

basic facts about, 134–37

lemons problem and, 140–45

moral hazard and, 148–51

transaction costs and, 138–39

Financial supervision (prudential

supervision), 433

Financial systems. See also international

financial systems

basic facts about, 134–37

conflicts of interest, 154–60

in developing countries, 152–53

flow of funds through, 16–17

lawyers and, 153

regulation of, 30–33, 137

structure of, 6

Financial Times Stock Exchange 

(FTSE), 22

Finland, 237, 462

Fire and casualty insurance companies,

27t, 28t, 29

Fire sales, 168, 175

First Bank of the United States, 192

First Boston Corporation, 456

First-e, 461

First National Bank of Boston, 456

Fiscal policy

in emerging market economies, 178–82

monetary policy and, 211

Fischer, Stanley, 202

Fisher, Irving, 78–79

Fisher effect, 78–79

Fisher equation, 48, 50n, 360

Fitch, 176

Five Cs, 405

Fixed exchange rate regimes, 380,

381–85, 392

Fixed-payment loans (fully amortized

loans), 39, 41–42

Fixed-rate assets, 573–74

Fixed-rate mortgages, 41–42,

330–31, 574

Floating exchange rate regimes, 380

Floor traders, 305

Flow of Funds Accounts, Federal Reserve,

84

“Following the Financial News” boxes, 9

Forecasting

econometric models for, 84

foreign exchange rates, 366–67

interest rates, 84–85, 110–12

stock prices, 121

yield curves and, 108

Foreign assets, 370–72

Foreign bonds, 20

Foreign capital, 185

Foreign currency, 375

Foreign exchange crises. See also

financial crises

in Argentina, 388–89

in Brazil, 388–89

in East Asia, 388–89

in emerging market countries, 388–89

in Germany, 386–87

in Mexico, 388–89

profiting from, 387–88

in Thailand, 388–89

Foreign exchange interventions, 374–78

defined, 374

money supply and, 374–77

sterilized, 377–78, 383–84

unsterilized, 376, 377

Foreign exchange markets, 344–67. See