This thesis is intended as a contribution to the literature referred to as the "optimum currency area literature". The purpose of the analysis developed in the thesis is to gain an understanding of the monetary and financial implications of the actual currency area structure of the international economy. The analysis can then be used for the purpose of assessing whether changes in this currency area structure might be desirable. The theoretical material falls into three parts. Cross-country data are used in the theoretical chapters to assess the explanatory value of the ideas. The theoretical analysis is then applied to the historical experience of an individual country, Argentina. Time series data are offered for the application to the Argentine case. The first theoretical section of the thesis is concerned with the structure of the money supply in an economy as between its imported and domestic components. A central tenet of the thesis is that there are cross-country differences in the size of the imported share of the money supply which is required for monetary and exchange rate stability, and that these cross-country differences can be related to structural characteristics of an economy. It is shown that the structure of incremental money demand has important balance of payments implications. A theoretical framework for the analysis of the structure of the money supply is developed. This framework is then used to argue that an economy which makes more extensive use of external financial intermediation will require a larger share of foreign exchange reserves in the monetary base. The second part of the theoretical analysis studies some relationships between the currency area structure of the international economy and patterns of international financial intermediation. It is argued that we can identify certain structural features of a currency area which would give rise to a tendency for residents to make use offoreign financial centres. The theoretical considerations lead to an explanation, in terms of currency area structure, of certain crosscountry differences in financial development. In the third theoretical section, the analytical framework which was developed in previous chapters is used to address three specific questions. These questions serve to bring out some answers to the more general question of what are the implications for an economy of using an imported money supply. The analysis yields some new perspectives on the monetary and financial implications of import substitution industrialization policies, as well as on other problems and policy issues

abstract: The Dodd-Frank Act was created to promote financial stability in the United States. However, no one is quite sure what it is yet. While action had to be taken and Dodd-Frank has some positives, Dodd-Frank, as it is deciphered today, has severe drawbacks. Since Dodd-Frank is only in its infancy, it is difficult to form an interim conclusion about its effects on agricultural lending at this point. After passing Dodd-Frank in 2010, the government began trying to figure out what it means. Four years later, they are still trying and are about half way through making the rules. This law essentially replaces Glass-Steagall, which was repealed several years ago. Many believe repealing Glass-Steagall was a big reason for the financial collapse of 2008. While Glass-Steagall was a short, easily understood document, Dodd Frank adds many more regulations and pages. This creates a long, bulky, confusing law that seems to be extremely tough to comprehend legally or as a banker. In this study, I try to balance the positives and negatives of Dodd-Frank to understand if it is more detrimental or beneficial to agricultural lending. While we find that Dodd-Frank does help keep banks from some of the risky investments that many believe led to the financial crisis, the added paperwork, compliance costs, and strain it puts on small banks can be worrisome. I interviewed several agriculture-lending professionals who regularly deal with the rules and regulations of Dodd-Frank to discover the impact the new law has on banks, their customers, and the economy as a whole. These interviews give insight into what Dodd-Frank means to the agriculture-lending market and what changes have had to occur since the law was passed. These interviews demonstrate that Dodd-Frank is largely looked down upon by the banking industry. The professionals interviewed are very experienced. After the extensive research, interviews, and discoveries that came of this study, it was concluded that Dodd-Frank seems to hurt the lending industry much more than it helps. One major concern is the strain Dodd-Frank puts on small banks and how it makes "too big to fail" banks even bigger. / Dissertation/Thesis / M.S. Agribusiness 2014

<p> Several commentators argued that the regulatory requirements imposed on community banks over the past 15 years placed an inordinate impact on these entities when compared to their larger counterparts. Specifically, the literature questioned the effect of regulatory costs on Return on Equity, Return on Assets, and Efficiency Ratios in community banks. The communities and small businesses that these banks serve are negatively impacted if these banks continue to disappear due to failure or the result of increased mergers and acquisition activity. This study sought to determine whether a statistically significant correlation existed between regulatory costs, as defined by the combined cost of legal fees, audit expenses, consulting costs, data processing costs, and salary and benefit costs which could be ascribed to compliance personnel, the ROE, the ROA, and the Efficiency Ratios of 21 community banks in the State of Maryland. Based on the results of the correlation analysis, such a correlation does exist. A regression analysis was performed on the independent variable, the cost of regulatory compliance, and the three dependent variables, ROE, ROA, and Efficiency Ratio, for each bank. Of the 63 analyses performed (21 banks with three independent variables) a statistically significant result (where <i>p</i> &lt; .05) was found in all but two instances and in one of those two, <i>p</i> = .053. The implications of this study weighed heavily on the nature of the governance of community banks by legislative and regulatory authorities. The relationship between the regulator and the regulated must be reexamined within the context of community banks. The ability of these institutions to continue to serve often rural communities may depend on how these authorities react to the regulatory burden imposed on community banks in this country.</p><p>

This thesis examines the question of the existence of banks as financial intermediaries. It is apparent in UK corporate bank lending that there is a long-term secular decline which is reducing the scale and affecting the form of such lending and which is inducing a redefinition of the role of banks in the financial system. In the final analysis banks exist as a response to market imperfections: scale economies; information asymmetries; monitoring reputation; control facilities; and commitment abilities. These provide alternative conditions defining banks, their position in the financial system and their comparative advantages.

The study deals with the Asian currency crises, in which the causes and consequences of the crisis are analysed. The two hypotheses which, are often viewed as competing, fundamental and panic and herd behaviour, are also examined. The first hypothesis states that fundamental imbalances triggered the Asian currency and financial crisis in 1997. The crisis occurred because the economies had deteriorating current accounts, a slowdown in growth rates and short-term debt approaching a dangerous level, while the second hypothesis states that sudden shifts in market expectations and confidence were the cause of the initial financial turmoil. When the crisis erupted it caused panic in domestic and foreign investors. A major focus of the study is to evaluate these two approaches and to examine whether there was evidence of insolvency prior to the crisis. A solvency index as originally popularised by Cohen (1991) is then calculated for each country. An econometric analysis of the trade sector is undertaken in which the Engle-Granger two-step procedure is employed, and the short-run dynamics are described by the Error Correction Mechanism (ECM). The Johansen Maximum Likelihood test is also employed as a comparison to the Engle-Granger Two-Step model. Subsequently the price elasticities obtained from the export demand model together with the GDP supply elasticity are used to calculate the index. From the results, it appeal's that all countries were solvent prior to the crisis in which the percentage of actual debt service paid (in 1997) was greater than the percentage that needs to be paid to be solvent. This suggests that a further external credit could have solved the problem, as it was a matter of short-term liquidity difficulties and panic, rather than insolvency.

<p> Trade-based money laundering has become one of the primary methods of funds transfer for criminal organizations and sponsors of terrorism. Stronger banking regulations have made this method more attractive as the funds can be hidden within seemingly legitimate trade activity. The TBML/FT typology can be extremely complex, however, and it can easily appear as legitimate trade activity to those unfamiliar with its intricacies. This paper reviews traditional and emerging methods of TBML/FT as well as common compliance program processes to determine the actions financial institutions can take to combat this activity. Trade-based money laundering techniques vary widely. Therefore, financial institutions cannot rely solely on compliance investigators to recognize them. Instead compliance programs must take a multifaceted approach and use all the resources available to them. The recommendations given are intended to enable financial institutions to identify TBML activity through industry-specific training, data analysis, and communication with other entities engaged in the fight against this method of value transfer. </p><p>

The objective of this thesis is to evaluate the degree of financial integration achieved by the main European Union (EU) members. The study is motivated by the necessity of alternative adjustment mechanisms in countries affected by asymmetric shocks. Economic theory suggests that capital flows may have equilibrating effects in such circumstances, if international markets are integrated. There is therefore a case for evaluating the level of integration already achieved by the EU financial markets, especially in areas less explored in the literature. The empirical application evaluates the level of financial integration between Germany and five EU countries (Belgium, France, Italy, the Netherlands and the UK). The analysis comprises the investigation of covered, uncovered and real interest rate parity conditions, for onshore and offshore assets with maturities between one month and ten years, within the period 1987 to 1997. The use of currency swaps differentiates this work from the usual studies of interest parity relationships, by allowing the analysis of a larger spectrum of maturities, and also a distinct assessment of connections between term-structures of interest rates across countries. The econometric methodologies adopted include cointegration, the ARDL approach (employed to examine long-run relationships between stationary and nonstationary variables), and Granger-causality analysis. The empirical results suggest that, although capital is fairly mobile across borders, asset substitutability is still low, and domestic and foreign (i.e., non-German) real interest rates continue to differ, especially for longer maturities. There is also evidence of links between domestic and foreign term-structures of interest rates, but most foreign long-term rates are independent from German short-term ones. These findings may have implications for the issue of fiscal discipline in the context of a single capital market, as they suggest that longterm interest rates may continue to differ across countries and, consequently, it will not be possible for national governments to borrow at a given common interest rate.

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This dissertation contains three essays which look at the role of price competition in banking. The method of investigation is a theoretical one. The first two essays examine the relative efficiency of relationship banking and price banking. The third essay discusses the determination of bank interest margin. Conventional wisdom suggests that increased interbank competition should improve social welfare and thus price banking should dominate relationship banking. Essay one shows that the opposite result may occur when the product market is imperfect and the lending instruments are loan commitments. Under relationship banking both banks and borrowers have bargaining power. The borrowers have substantial bargaining power when the costs of switching banks are small. In this case, it pays the banks to charge interest rates below the competitive rates in order to keep their customers. The interest losses are compensated for by higher commitment fees paid upfront by the borrowers. Since interest costs are lower under relationship banking than under price banking, borrowers produce more and output price declines. Social welfare thus unambiguously increases. Essay two goes on to examine the relative efficiency of relationship banking and price banking under the asset substitution problem. The bank-customer relationship is assumed to provide a credible commitment for a borrower to refrain from transacting with other banks. The outcome under relation-ship banking is second-best since underinvestment results in solving the asset substitution problem. The multilateral credit transactions permitted by price banking impose negative externalities to existing loans by inducing the borrower to substitute riskier project. More underinvestment is needed to resolve the dual incentive problem and equilibrium results in reduced welfare for borrowers. Essay three tackles the determination of bank interest mar-gins using a simple production-based model of risk-neutral banks which face (i) loan default risk, (ii) interest rate risk, (iii) capital regulation, and (iv) deposit insurance. The optimal bank interest margin is shown to be increasing with the variability of the short-term money market rate, but decreasing with either a stiffer capital requirement or an increase in the flat-rate deposit insurance premium. / Business, Sauder School of / Graduate

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