The Changing Environment of International Financial Markets: Issues and Analysis.

• Author: Li, Jane-yu Ho

This book contains papers presented at a conference under the auspices of the International Trade and Finance Association in Laredo, Texas, in April 1992. The conference was motivated by the need to take stock of both theoretical and empirical work in the subject areas, after decades of rapid changes in global financial market. These changes include the emergence of financial markets in developing economies and the changing political landscape after the dissolution of the Soviet Union.

Papers included in this volume are of three basic types: analytical, descriptive, and empirical. Subjects covered are broad and encompassing, organized into seven parts: exchange rate markets, international interest rates, balance of payments and international reserves, foreign debt and country risk analysis, capital markets, and tax distortions and international banking. A good introductory chapter links these areas.

Most papers include a literature review, methodology, analysis, research findings and policy implications on risk management. Some papers stretch to include general public policy recommendations. What seem lacking are discussants' comments on the validity of research findings or methodology. And, less technically trained readers will have difficulties following discussion details.

General speaking, I found the papers in the capital markets section rich in background content, especially the paper about risk management and corporate governance in imperfect capital markets (by Klaus P. Fischer, Edgar Ortiz and A. P. Palasvirta). In the absence of arm's length financial markets, risk management leads to different strategies - some are reflected in the reluctance to separate management control from the ownership. Final outcomes of strategies often reflect difference in market environment. Various aspects of less developed financial markets are discussed at length. Several propositions are developed as strategies. However, the discussion about public policy implications to further develop the financial markets is rather weak. It would be better to limit the discussion to market strategies and not to venture into economic development strategies since that requires more discussions of the institutional and cultural background. This flaw also is shared by several other papers in this volume.

The capital market section also contains a paper testing international capital market efficiency with a statistical analysis of real rate of return, comparing...