우선 제Ⅱ장에서는 국제금융시장의 형성 및 전개과정을 살펴보고자 한다. 유로시장의 형성과 발전과정이 국제금융시장에 미친 영향을 역사적으로 고찰하고, 금융의 세계화와 국제금융환경의 구조적 변화를 이해함으로써 금번 동아시아 금융위기의 실체를 정확히 파악하고자 하였다. 아울러 최근 국제금융시장의 동향 및 신흥시장으로의 자금흐름 현황을 간략히 정리하였다.
제Ⅲ장에서는 아시아 금융위기가 국제금융시장에 미친 파급효과를 분석하였다. 아시아 금융위기의 전개과정과 아시아 금융위기에 따른 신흥시장에 대한 자본유출입 현황을 정리하였다. 아울러 국제금융환경변화에 따른 아시아 금융위기의 발생과정 및 확산과정을 체계적으로 정리하였고, 국제금융시장의 구조적 불안정성에 따른 자본이동의 불규칙성에 대해서도 논의하였다.
제Ⅳ장에서는 신흥시장에 대한 과도한 투자실패로 야기된 헤지펀드의 파산과 이에 따른 파급효과를 LTCM 금융사고를 중심으로 고찰하였다. 또한 LTCM 금융사고가 가져다 준 국제금융시장의 반응과 시사점을 정리함으로써 최근 논의되고 있는 단기자본이동에 대한 규제론에 대해서도 검토하였다.
제Ⅴ장에서는 1999년도 국제금융시장의 최대의 사건으로 등장할 유로화의 출범을 중심으로 향후 국제금융시장의 판도 변화를 조망해 보았다. 특히 유로화 출범 이후 달러화의 가치변동에 미치는 효과에 대해서도 살펴보았다. 마지막으로 제Ⅵ장에서는 최근 국제금융시장의 변화와 향후 국제금융시장의 불안요인을 정리하고, 국제금융환경변화에 대응한 정책방향과 정책과제를 점검해 보았다.
Ⅰ. Introduction (Yunjong Wang)
As a ripple effect of the East Asian Financial crisis, factors resident in the emerging markets that fueled instability forced an increasing number of countries to seek rescue from the International Monetary Fund. Financial crisis and recession spread and deepened, this ultimately led adbanced economies to undertake coordinated interest rate cuts. Partially as a result of the interest rate cuts, conditions in the current international financial market environment have improved since Russia declared a moratorium last August. Nevertheless, there continue to exist forces that could quickly bring a return to the chaos seen in 1997 and 1998.
First, signs of widespread insecurity remains in financial markets of the advanced economies. Despite the U.S. Federal Reserve Board three rounds of lowering interest rates, low-risk asset management remains the preferred investment strategy. Further, as the Long Term Capital Management(LTCM) crumbled last September, hedge funds have undertaken serious restructuring efforts. While, the collapse of the hedge funds will reduce enthusiasm for the risky investments that contributed to the financial crisis, the collapse has also severely damaged the health of the banks that did business with the hedge funds. As for Japan, the huge amount of non-performing loans led Moodys to downgrade the countries sovereign credit rating from Aaa to Aal last November. The resulting higher borrowing costs are affecting negatively Asian financial markets as Japanese interest rates rise.
From a short-term standpoint, the introduction of the euro may further exacerbate instability in international financial markets. The prevailing view is that the euros emergence will lead to USD 500 billion to 1 trillion worth of liquidity in international financial market. As countries adjust the composition of their foreign-currency reserves to the new currency and as the euro challenges the dollar as the currency of settlemint, short-term volatility of the foreing exchange market can be expected. As a result, the European nations will need to pay attention to the increase in the voltility of the dollar and euro if both monetary authorities will maintain a policy of benign neglect.
Financial anxiety within the emerging markets appears likely to persist for at least the short-term. Emerging markts ard largely high return-high risk propositions, Thus, if international investors continue to perfer safer investments, these emerging markets will continue to fall victim to al liquidity shortage. For this reason, 1999 will have to be a year in which the policy coordination to pervent continuation of an international financial crunch will rely on the initiatives of advanced economies.
To this end, this report seeks to educate and increase awareness of recent events in world financial markets based on the review of the most important current changes in international financial markets, and further discuss and suggest policy directions for the future. In Chapter Ⅱ, we will look at the formation and historical developments of international financial markets. In particular, we will focus on the euromarket and its effect on international capital markets. Through understanding the structural changes of the international financial environment and the internationalization of financial markets, we seek to identify the fundamental causes to the East Asian financial crisis. Furthermore, we have added our analysis of the most recent developments in the world financial markets and the capital flows into the emerging markets. In Chapter III, we have analyzed the effects the of the Asian financil crisis on international financial markets. We have descrigbed how the Asian financial crisis came about, spread and affected capital flows of emerging markets. The discussion leads to what extent the irregularty of capital flows results from the structural instability of the world financial markets. In Chapter IV a thorough analysis is provided concerning hedge funds, including our demonstration of how their recent downfall begun by the collapse of Long Term Capital management (LTCM), was primarily caused by the failure of exorbitant investments in the emerging markets. In Chapter V we have provided forecasts concerning the chnges and movements in international financial markets given the emergence of the euro. We place emphasis on how the euro will affect the exchange rate fluctuations of the U.S. dollar. We devote the final chapter to discussing current changes in international financial markets, the factors that may lead to instability in the future and the pressing policy issues and possible directions regarding the near future.
Ⅱ. Historical Developments of the International Financial Market(Jae Joon Lee)
The primary benefit of freer capital movements in international financial markets is that allocative efficiency of the investment can be attained at the international level. A significant amount of international liquidity has been supplied by the euromarket as the market includes a huge array of traded financial instruments, including bonds, stocks and derivatives. And because it is borderless within Europe and free from all national and most institutional regulations, the euromarket itself is close to being a perfectly competitive market. Likewise, the euromarket has developed financial institutions that are capable of providing creative and varied financial intermediary services.
Since the end of the second World War, the United States economy has gained preeminence and its currency has been the international currency of payment settlement. In adition to the need for and alternative to the dollar, there were a number of other contributing factors to the development of the euromarket : the intensification of the Cold War since the latter half of the 1950s, the nullification of foreign exchange controls in Western Europe since the 1960s, the oil shocks of the 1970s providing oil-exporting nations with an enormous surplus of dollars and the ability of investors to evade the haphazard regulations have led to continuous growth of the euromarket. Furthermore, since successful financial innovations instituted since the 1980s, including the U.S. Federal Reserve Boards change in monetary policy, emergence of floating rate-based financial commodities in response to the increasing volatility of interest rates, expediency of the settlement system, and the emergence of the U.S. International Banking Facilities (IBF), have likewise led to euromarket growth.
There are four underlying causes behind the drastic changes in world financial markets in the last 20 years. First, financial instruments and strategies have grown increasingly advanced and numerous. Second, market integration has grown as investors in advanced markets have looked for increased opportunities and as demand for capital in developing markets has grown.Third, traditional differences among financial institutions such as banks, securities firms, and insurance companies have been eroding. Fourth, mergers and acquisitions activity has resulted in an increasing world dominance by supra-national financial groups. These structural changes are molding a new international financial environment with investors more open to international markets.
The volume of capital financing in international financial markets prior to the Asian financial crisis in 1997 had been at an all-time-high. However, this all ended upon the outbreak of the currency crisis in Thailand in July. The issuance of government bonds in the fourth quarter of 1997 decreased 40 percent on average against the level of the first three quarters of the year.
Such pattern is prevalent throughout Asia and has had a strongly negative effect on international financial markets. However, the volume of international financial transaction volume improved in the first and second quarters in 1998.The roller coaster continued as the Russian crisis and worries of a recurrence of the Asian financial crisis caused investors to again fly to low-risk assets, a resulting spread of credit risk in emerging bond markets, ensured that the international financial crisis persisted. At this juncture, investors sitting on highly leverage positions largely bailed on or readjusted their bets. This resulted in increased fluctuations of major country bond yields and the yen/dollar exchange rate.
Since the Asian financial crisis, such reevaluation of credit risks in the emerging markets have affected capital flows into the markets. Therefore, in order to boost confidence in emerging markets and to resume capital inflows, the following points will need to be tackled. First, the governments of emerging markets should address financial structure weaknesses immediately. Second, lending institutions and investors should alike analyze credit risks more thoroughly. They should also discriminate between investment decision based on more asset-inherent factors instead of investment decisions based on more regional factors. Such strategy would reduce risk to one region and restrain contagion effects in the international financial system. Third, advanced economies and international financial institutions should institute policies that foster a stable supply and maintenance of liquidity in order to increase stability in international financial markets.
The massive fluctuations of capital flow in and out of emerging markets also must be addressed. While to an extent capital flows were based on differing levels of financial and corporate health, they were also undoubtedly exaggerated and exacerbated the growth and then contraction of affected markets. Some countries have instituted various forms of capital controls in the wake of the Asian crisis as a way of preventing such abrupt capital flight in the future. However, the costs of such barriers may be even greater than the gains in stability.
III. The Asian Financial Crisis and its Spillover Effect on the International Financial Market (Sang-Uck Loh, Woo Jin Kim)
Thailands financial crisis prompted by the Thai Bahts devaluation on July 2, 1997 developed into a financial crisis for the whole Asian region. Its spill-over effects on the world economy surpassed all expectations. The Asian economies, which had experienced an incredible period of high and sustained growth are now experiencing unprecedented recessions. This abrupt reversal has cut sharply into growth of the world economy in 1988 and has had a strong impact on international financial markets as it prompted a sudden reversal of the net inflow from international capital markets into emerging markets. Receiving the blunt of the blame for the crisis are the growing current account deficits, economic slowdown and rigid foreign exchange rate system; however, the structural instability of international financial markets should not be overlooked as a further cause.
The greatest impact of the Asian financial crisis on international financial markets is the sudden reversal of the capital inflows to the emerging markets, largely a result of the drastic capital outflow from the Asian region. This is where the greater impact of the Asian crisis can be clearly differentiated from the Mexican in late 1994. While there was an extended period of net capital inflows into both regions prior to the crisis, much of the huge outflow from Latin America in the crises relocated to other emerging markets.However, most of the large net outflow of capital from Asia following the regions crisis did not end up in other emerging markets, but instead fled to what were perceived as less risky markets.
Generally, the past strong capital inflow to emerging markets was the result of changes in the international financial market environment and its structure.The major recent changes included the low interest-rate policies of advanced economies, the globalization of international commercial and investment banks and widespread financial sector liberalization by emerging markets. When we observe the reversal of capital flows in three separate instances of financial crises since the 1980s, including the most recent Asian financial crisis, a question has to arise - whether current international financial markets can sustain stable capital flows into emerging markets and whether investors are accurately assessing risk. There has been a plethora of discussion and research recently attempting to clarify the structural instability of international financial markets.
More than a year has passed since the onset of the Asian financial crisis, but there is no clear sign of recovery. However, liquidity is again abundant in international financial markets due to the advanced economies low interest-rate policy and this has helped some emerging markets, including Asian markets to again gain access to a degree of international capital. Asian economies are also doing better as a result of the continued restructuring efforts and capital will likely begin flowing more strongly into the emerging markets in the near future, including Asia. The speed and the volume of capital inflows, however, would probably differ with those of the past.
Based on the particular development of the Asian financial crisis, it seems premature to expect international financial market mechanisms to rationally evaluate investment risks and provide sustained and sufficient liquidity to emerging markets. Further, as the Asian crisis clearly demonstrated, international capital market integration makes it highly likely that a new crisis in one country will have a widespread effect.
As a result, future capital flows of emerging markets may not be as drastic and reckless as they were in the past. Rather, they will take place on a more selective and steady basis. The investors will want to make investment decisions based on thorough due-diligence of the associated risks based on the most accurate of available information. Investors are unlikely to blindly invest in a broad range of areas, but instead invest in a specific country of interest.
Therefore, those emerging markets targeting foreign capital must improve the efficiency of their financial and industrial sectors through structural reforms and thereby meet the standards required by the international investment community.
Ⅳ.Long Term Capital Management (LTCM) Crisis and its Effect (Young Woo Lee)
The fury of the Long Term Capital Managements collapse last September was intense enough to shank up the worlds financial markets. Anxiety that the LTCM crisis would have a domino effect as the banking and investment institutions heavy losses in the hedge funds would create chaos in the financial markets had an immediate negative affect on liquidity and led to a chain of stock collapses in the New York Stock Exchange (NYSE), as well as in European and Asian stock markets. As a countermeasure, the 15 major creditors decided to financel a USD 3.6 billion emergency-rescue package for LTCM through the mediation of the Federal Reserve Board. The LTCM crisis continued to be an inexorable source of the loss of liquidity in the U.S. financial market. While the Feds lowering of interest rated allowed markets to recover, the effect of the collapse of LTCM still linger.
One of the main lingering effects is that many international investment banks have reconsidered their risk management models and discussed the need for stronger means to regulate hedge funds. Standard ＆ Poors announced that it would scrutinize the credibility of the firms that had invested in the hedge funds, taking the LTCM as the hedge funds, taking the LTCM as the initial case of the investigation. The U.S. Secretary of Treasury Rubin issued orders for the Department of Treasury, Federal Reserve Board, Securities and Exchange Commission, and Commodities Futures Trading Commission, and the Federal Deposit Insurance Company and other financial supervisory bodies to conduct thorough investigations of the trading between the hedge funds and banks. Prior to the LTCM crisis, the U.S. government did not pursue a positive regulation of hedge funds. However, in the wake of the collapse of LTCM, it now supports a certain degree of regulation, supervision and/or dissemination of information regarding hedge funds. At the October 5 Conference of G22 and the December 7 Finance Ministerial Conference of the G7, the participants decided on a set of standards to rigorously enforce the regulation and supervision of the hedge funds and their financial trading.
Some may characterize the Feds intervention of the LTCM crisis as a way to bring future stability to financial markets. This was the first case of the Feds intervening to give emergency-rescue-fund support to a non-financial institution. Financial markets appear to have evaluated the LTCM crisis intervention as an action taken to prevent a disastrous affect on financial markets. Regardless of the Feds motives, withholding financial institutions from incurring bad investment cost goes against market principles and if investors believe such bail-outs will be forthcoming in future crises, this could create widespread moral hazards.
Although there is a strong tendency to consider hedge funds as the refuge of rouge speculators, they have a diversified range of activities, and influence. In addition to their speculative activities, hedge funds invest in debt-restructuring funds, foster technological development and emerging market growth; hedge funds bring increased liquidity to financial market, thereby encouraging economic activities and a reallocation of capital towards efficient firms and countries their arbitrage trading.
In spite of this, hedge funds do pose a problem in financial markets as they are often associated with highly leveraged and speculative positions in the pursuit of high profitability. As evidenced in the LTCM crisis, the collapse of a single hedge fund can sap liquidity and vitality from the entire financial market. Thus, over-reliance on unfettered hedge fund activity may further increase the volatility of the markets. Extreme short-term mobility is another problem of hedge funds. As seen in the Asian financial crisis, hedge funds move faster than average investments. This is largely due to their strategy of short but huge bets based on market-beating accessibility to information and mobility. Therefore, the trading strategy of the hedge funds often leads to mob psychology in financial markets as other investors often copy the positions of large and successful hedge funds.
In the end, however, despite the negative affect hedge funds may bring, it is a question of whether it is even possible or practical to regulate hedge fund activity. Regulating hedge funds would be an immense task due the incredible amount of positions hedge funds take and the frequency with which they change these positions. Currently, there is discussion on institutionalizing the variable deposit requirement (VDR) to prevent excessive capital flows.However, such talk may not translate into action. Furthermore, if other countries do not institute the same regulations, then such controls will have little effect other than to push investment to less regulated foreign markets. In the end hedge funds can only partially be regulated foreign markets. In the end,hedge funds can only partially be regulated and for only a short period. As it is unrealistic to eliminate hedge funds, they must be accepted as part of the international financial structure. We can only seek to indirectly regulate the hedge funds by inducing financial institutions that trade with them to disclose the volume and content of their trading so as to enhance transparency as much as possible.
V. Euro and its Effect on the International Financial Market (Chae-Shick Chung)
Since the demise of the Bretton Woods system, the U.S. dollar has taken the dominant position in international trade and capital markets. However, the emergence of the European Monetary Union and the euro will likely result in two major currencies in world market. The emergence of a European financial market with a unified currency comparable to that of the United States in size will intensify the pressures for enlargement and securitization already underway since the early 1990s in international capital market. This will further contribute to increased international capital mobility and capital flows as advanced economies likely call for increased capital liberalization. Thus, the developing countries should consider undertaking sound fiscal and macroeconomic policies, coupled with sound policy towards the financial and foreign exchange markets.
In order for the euro to properly serve the needs of international financial markets as does the U.S. dollar, Europe must maintain currency stability, implement structural reforms in the labor market and construct a framework for an EU-wide payment system. Such improvement of the eurolands financial infrastructure and creation of a further diversified spread of financial assets will together satisfy the demands for the euro-denominated financial assets. will together satisfy the demands for the euro-denominated financial assets. In turn, this will increase stability of the euro and its stature as the currency-of-settlement in international markets. As the euro eliminates the foreign exchange risk within its market, thereby decreasing intra-euro transaction costs, it is likely to boost investment in the region. The recent low-interest policy of euro countries and the likelihood that euro authorities will target long-term low interest rates in the region should stimulate growth in the stock market, thereby advancing the regions financial markets to a new level of sophistication and activity.
As bond pricing throughout euro nations has been simplified and currency risk has disappeared, bond prices will eventually become merely a function of risk. The euro will ultimately decrease the issuing cost of governmant bonds and also the transaction costs for investors. This in turn would contribute to the eventual unification and consolidation of all euro bond markets.
As for European corporate bonds and their volume, there remain issues that need to be taken up due to the problems associated with regulatory and tax impediments. However, the future looks promising for corporate bonds as a stimulation of the bond markets is expected, with the resulting increasingly competitive environment pressuring bond underwriters and issuers to proceed with greater efficiency. Better performance of pension funds would also improve the lot for the European bond markets. Regardless, as the bond markets are likely to reduce financing costs, this will reduce the appeal of bank loans - the customary financing method of the past. However, the big bank domination of credit markets and their involvement in merger and acquisition activity and other securities-related areas are new areas where banks may thrive.As the Japanese yen risks being pushed aside by the newly emerged euro, there is speculation that Japan will make an effort to internationalize the yen.
The yens role as an international currency has been thus far limited due to the underdevelopment of its government bond markets. In response, Japan is considering such inducement as non-resident tax exemption (incurred on the dividend from short-term trading), transactions fee exemption for securities firms investing in government bonds, stimulation of secondary-markets for short-term securities, and improvement of the distribution and settlement structures for government bonds and short-term money markets. The internationalization of the yen could help Korea through boosting the efficiency of its private and public asset management. If Japan were able to truly establish the yen as an alternative to the dollar and the euro in international markets, this would reduce the wide fluctuation of the yen.The European Monetary Unions unified financial markets under the euro will unleash further advanced economy demand for capital liberalization.Therefore, the Korean government will need to complete its restructuring with expediency as well as make preparations if Japan appears poised to encourage use of the yen in international markets. Furthermore, Korea must plan for infrastructure developments in response to the drastic liberalization of foreign exchange controls.
Ⅵ. Recent Developments in International Financial Markets and the Policy Issues in Korea (Yunjong Wang)
Since the early 1990s, the mobility of international capital has increased due to the increasing demand for capital in emerging markets, growth of foreign direct investment, and developments in derivative markets. Such change is the direct result of widespread capital account liberalization efforts and the increased rate of growth of emerging markets. In the latter half of 1997, however, there was a decrease in the volume of private capital flows into emerging markets chiefly due to the East Asian financial crises. According to capital-flow analysis of the Institute of International Finance (IIF), the expected 1998 capital inflows into emerging markets are USD 158.2 billion, a 34.5 percent decrease from USD 241.7 billion in 1997 and the net volume of capital flows for 1999 is expected to remain similar to that of 1998.
A significant share of the international capital that was withdrawn from Asian markets since the regions crises has flown into other emerging markets. However, the government bond prices of the emerging markets have again plunged as investors flew to quality assets in response to the rising Russian crisis beginning in July of 1998. This phenomenon continued until the middle of October, when the worlds financial markets were stabilized by the U.S. Federal Reserve Boards two rounds of lowering interest-rates which the Fed justified by expressing concerns about the imminence of a credit crunch in the U.S.Although the world financial market is expected to become relatively stable in 1999, there still remain downside risks, including the possibility of a further collapse of hedge funds, continued financial anxiety in Wall Street and London, a depreciation of the yen if the Japanese financial reforms and economic boosting measures fail, latent factors causing further instability in emerging market (especially Russia and Brazil), and the unknown impact of the euro.Thus, skittishness is prevalent throughout international financial markets and the Korean government must design efficient and constructive measures to counter challenges that arise as external conditions inevitably change. To do so, Korea must pay close attention to movements in financial markets both at home and abroad and should develop policy options to circumscribe external shocks that may reverberate in the Korean economy.
In 1999, Korean government policy towards international financial markets should focus on 1) stabilizing the won, the current account balance and economic growth and other factors that are instrumental to the accomplishment of macroeconomic goals, 2) exhausting all efforts to boost international creditworthiness, 3) boosting access and financial instruments of the foreign exchange market in preparation for capital account liberalization, and 4)maintaining stability in the foreign exchange markets through improving the structure of external debts.
Short-term interest rates will remain an important policy instrument to stabilizing foreign exchange markets and achieving targeted inflation rates.Where the won faces strong appreciation pressure, Korea can easily lower short-term interest rates.
Ⅰ 序論 /王允鐘
Ⅱ 국제금융시장의 형성 및 전개 /李載濬
1. 유로시장의 형성 및 전개
2. 금융의 세계화와 국제금융환경의 구조적 변화
3. 최근 국제금융시장의 현황
Ⅲ 아시아 금융위기가 국제금융시장에 미친 파급효과 / 盧相旭 , 金于珍
1. 아시아 금융위기의 전개
2. 아시아 금융위기와 신흥시장에 대한 자본유출입 역전
3. 국제금융환경의 변화와 아시아 금융위기: 확산경로
4. 자본이동의 역전에 대한 논의: 국제금융시장의 구조적 불안정성
5. 향후전망과 시사점
Ⅳ LTCM 금융사고 발생과정과 국제국제금융시장에 미친 영향 /李永雨
2. LTCM社의 설립 배경
3. LTCM社의 성장 과정과 투자전략
4. LTCM의 활동 및 성과
5. LTCM 금융사고 전개과정과 원인분석
6. LTCM 펀드매니저의 자구노력 실패
7. LTCM 금융사고 수습과 긴급구제자금 지원
8. 국제 금융시장의 반응 및 시사점
Ⅴ 유로貨의 등장이 국제금융시장에 미치는 파급효과 /鄭在植
1. 유로貨의 출범과정
2. 유로貨의 출범과 유로 지역 금융시장 환경의 변화
3. 유로貨 출범이 국제통화제도에 미치는 효과
Ⅵ. 국제금융시장의 최근 변화와 한국의 대응과제 /王允種
1. 국제금융시장의 최근 변화
2. 향후 국제금융시장의 불안요인
3. 국제금융 환경변화에 대응한 정책방향
4. 주요 정책 과제
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