Emerging Markets Finance
SPRING 2002
| Lecture: T 9:00am-10:50am | Room: 1401 IAB |
| Telephone: 203-849-7577 | Office: |
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E-mail: [email protected] |
Office Hours: |
The objective of this course is to describe and analyze the operations and techniques of modern emerging markets. We will begin by examining the major forces that shape the emerging markets at the end of the 20th century. We will then focus on the four major areas of emerging markets finance: fixed income, equities, foreign exchange and investment banking.
The class text will be David Beim and Charles Calomiris’ Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001.
Most of the material will be on reserve at the library.
Students will be required to read all of the material in the course pack prior to each class. This also applies to the reading assignments listed for the first class. Students are strongly encouraged to review the material in the additional reading list. The class text will be David Beim and Charles Calomiris’ Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001. Most of the material will be on reserve at the library. Students will need to complete a research report on a sovereign or private sector investment. The report will include sections that analyze the sovereign risk, the exchange rate risk, credit risk and market risk associated with a particular instrument. The report will be 3 pages, maximum. Proposals will be submitted by the close of business at the end of the third class. Be sure to put your name and contact information on the finished product.
1. Introduction
Setting the Context: International Capital Flows
Reading Assignment:
International Monetary Fund World Economic Outlook and International Capital Markets. December 1998. pp. 17-34.
Beim, David and Charles Calomiris Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001. pp, 1-25.
Eichengreen, Barry and Donald Mathieson "Hedge Funds and Financial Market Dynamics" International Monetary Fund Occasional Paper 166, May 1998. pp. 2-25.
Martin Wolf, “The Age of Financial Instability.” Financial Times, June 13, 2001, p. 15.
2. The Fixed Income Markets
Commercial Bank Lending and the Debt Crisis
The Brady Solution
Sovereign Eurobonds
Reading Assignment:
Brealey, Richard and Stewart Myers “Valuing Risky Debt” Principles of Corporate Finance McGraw-Hill, 1988, pp. 543-569.
Molano, Walter “From Bad Debts to Healthy Securities? The Theory and Financial Techniques of the Brady Plan,” Business and the Contemporary World, VIII, No. 3-4.
Cassard, Marcel and Folkerts Landau, "Sovereign Debt: Managing the Risks," Finance and Development, December 1997.
3.a. Equity and Credit Markets
Equity Issuers in Asia and Latin America
Privatization
Credit Analysis
Reading Assignment:
Brealey, Richard and Stewart Myers “An Overview of Corporate Financing” Principles of Corporate Finance McGraw-Hill, 1988, pp. 303-323.
Beim, David and Charles Calomiris Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001. pp, 192-222.
Erb, Claude B. et. al. “The Making of an Emerging Market,” Emerging Markets Quarterly, Spring 1997.
Pomerleano, Michael "Performance of Emerging Market Funds" World Bank, mimeo, 1998.
3.b. Foreign Exchange Markets
Exchange Rate Regimes and Macroeconomic Policy
Exchange Rate Crises and Economic Adjustment
Emerging Markets Currency Markets
Reading Assignment:
Peter Lindert and Charles Kindelberger “Money and Foreign Exchange” International Economics Richard Irwin, Inc. 1982, 319-335.
Beim, David and Charles Calomiris Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001. pp, 228-253 and 292 -322.
Freidman, Milton "A Primer on Exchange Rates," Forbes Magazine, November 2, 1998.
Kaminsky, Graciela, Saul Lizondo and Carmen Reinhart, Leading Indicators of Currency Crises, mimeo, October 1, 1997.
4.a. Emerging Markets Derivatives
Use of Derivatives in Emerging Markets
Structured Products, Futures, Forwards and Options
Reading Assignment:
International Monetary Fund (IMF) "Annex V: Globalization of Finance and Financial Risks" International Capital Markets, September 1998.
Tsetsekos, George and Panos Varangis The Structure of Derivatives Exchanges: Lessons from Developed and Emerging Markets Policy Research Working Paper 1887, World Bank, February 1998.
4.b. Corporate Finance and Summary
Privatization and Ownership Structure
Capital Markets
Reading Assignment:
Molano, Walter "The Political and Economic Factors Affecting the Implementation of Privatization Policies" Business and the Contemporary World, No. 4, 1995.
Beim, David and Charles Calomiris Emerging Financial Markets New York: Mcgraw Hill Irwin, 2001. pp, 86-137.
Cavallo, Domingo "Lessons from Argentina's Privatization Experience" Journal of International Affairs, Winter 1997.
Krugman, Paul "What happened to Asia? " (Japan Conference, January 1998)
Suggested Readings
Lesson 1.
Edwards, Sebastian On Crisis Prevention: Lessons From Mexico And East Asia National Bureau of Economic Research, February 1999.
Lesson 2.
Reisen, Helmut and Julia von Maltzan Boom and Bust and Sovereign Ratings International Finance 2:2, 1999.
Lesson 3. a.
Jorion, Philippe and Darious Miller, “Investing in Emerging Markets Using Depositary Receipts,” Emerging Markets Quarterly, Spring 1997.
Barry, Christopher et. al., “A Convenient Way to Invest in Emerging Markets,” Emerging Markets Quarterly, Spring 1997.
Peskin, K. Stuart “Emerging Markets Benchmarks: Understanding an Evolving Asset Class,” Emerging Markets Quarterly, Spring 1997.
Littler, Graeme “The Growth of Latin America’s Equity Markets,” Finance and Development, March 1995.
Dornbusch, Rudiger, Ilan Goldfajn and Rodrigo Valdes "Currency Crises and Collapses" Brookings Papers on Economic Activity 2: 1995, pp 219-293.
Lesson 3.b.
Calvo, Guillermo and Carmen M. Reinhart Fear of Floating University of Maryland and NBER April May 4, 2000.
Gonick, Catherine "The ADR Whirlwind," Global Investment, December 1995, p. 28-32.
Lesson 4.
Molano, Walter T. The Logic of Privatization, Greenwood Press, 1995.
Eichengreen, Barry Toward A New International Financial Architecture: A Practical Post-Asia Agenda International Institute for Economics, 1999. Chapter 2.