World Economic and Financial Surveys

Global Financial Stability Report

Market Developments and Issues
September 2004

The Global Financial Stability Report provides semiannual assessments of global financial markets and addresses emerging market financing in a global context.*

Disclaimer
Use the free Adobe Acrobat Reader to view all chapters below.

Contents

	Preface

Chapter I.	Overview (734KB pdf file)
Chapter I.	Risks in the Period Ahead
	Policy Conclusions for the Short and Medium Term
	Issues for the Long Term: Reforms of the Pension Industry
	Policy Issues for the Pension Sector
	Capital Flows Between Emerging and Mature Markets
Chapter II.	Global Financial Market Developments (899KB pdf file)
Chapter II.	Overview
	Developments and Vulnerabilities in Mature Markets
	Developments and Vulnerabilities in Emerging Markets
	Emerging Market Financing
	Banking Sector Development in Emerging Markets
	Structural Issues in Mature Markets
	References
Chapter III.	Risk Management and the Pension Fund Industry (395KB pdf file)
Chapter III.	Why Pension Funds Are Important for Financial Stability
	The Funding Challenge
	Key Influences on Pension Funds’ Financial Management
	Asset Allocation and Risk Management
	Conclusions and Policy Recommendations
	References
Chapter IV.	Emerging Markets as Net Capital Exporters (455KB pdf file)
Chapter IV.	Stylized Facts
	The Post-Crisis Balance Sheet Adjustment Process
	Accumulation of Reserves and Reliance on Local Markets
	Global Factors
	Conclusions and Policy Issues
	References

Glossary (205KB pdf file)

Annex: Summing Up by the Chairman (191KB pdf file)

Statistical Appendix (1,109KB pdf file)

Boxes
2.1	Stocks, Flows, and Vulnerability Assessments
2.2	Market Repositioning and Deleveraging
2.3	Financing Flows and Global Imbalances
2.4	Emerging Market Spread Compression: Is It Real or Is It Liquidity?
2.5	German Issue of Russian Federation Credit-Linked Notes
2.6	Collective Action Clauses
2.7	Russia: Recent Turbulence in the Banking Sector
2.8	Insurance Industry Update
2.9	Hedge Fund Strategy Definitions
2.10	Sample of Popular Energy Contracts
2.11	European Energy Trading
2.12	The Revised Basel Capital Framework for Banks (Basel II)
2.13	Recent Developments in Securitization Markets in Europe and Japan
2.14	Definition of Value at Risk
2.15	Volatility Estimation
3.1	Hybrid Pension Plans
3.2	Individuals’ Life-Cycle Savings and Global Capital Markets
3.3	The Tax Treatment of Pension Plans: a Comparison for Selected Industrial Countries
3.4	Proposed Risk-Based Capital System for Pension Funds in the Netherlands
3.5	Comparison of U.S. FAS 87, U.K. FRS 17, and Proposed IAS Standards
3.6	Defined Benefit (DB) Pensions and Corporate Finance Theory
3.7	Economics and Pension Fund Asset Allocation
4.1	Capital Flows to Africa and the Middle East
4.2	Data Sources and the Trends in Bank Lending Flows to Emerging Markets
4.3	Distressed Debt Markets: Recent Experiences in Mature and Emerging Markets
4.4	Distance to Distress as a Measure of Balance Sheet Vulnerability
4.5	Market-Based Insurance Mechanisms

Tables
2.1	Selected Local Currency Bond Spreads
2.2	Emerging Market Financing
2.3	Emerging Market Countries: Selected Financial Soundness Indicators
2.4	Exposure of Foreign Banks to Emerging Markets
2.5	Hedge Funds: Number of Funds and Assets Under Management
2.6	Leverage Estimates by Hedge Fund Strategy
2.7	Price Volatility for Energy and Other Financial and Nonfinancial Instruments
3.1	Life Expectancy at Birth: Estimates and Projections
3.2	Asset Allocation of Autonomous Pension Funds
3.3	Financial Assets of Institutional Investors, 2001
3.4	Pension Fund Holdings Compared with the Size of Domestic Market, 2001
3.5	Selected Countries: Total Outstanding Long-Term Bonds
3.6	Sources of Retirement or Replacement Income
4.1	Emerging Markets: Balance of Payments Errors and Omissions
4.2	Bank Lending in Emerging Markets
4.3	Debt Securities in Emerging Market Countries
4.4	Capital Flows in Crisis and Non-Crisis Countries
4.5	The Post-Crisis External Debt Adjustment in Selected Emerging Markets
4.6	Reserves and Related Ratios for Selected Countries as of End-2003
4.7	Derived Portfolio Investment Liabilities by Nonresident Holder: Equity and Debt Securities
4.8	Derived Portfolio Investment Liabilities by Nonresident Holder: Short- and Long-Term Debt Securities

Figures
2.1	One-Month Federal Funds Futures Rate
2.2	Strip Curve Interest Rate Expectations
2.3	Selected Central Bank Policy Rates
2.4	Ten-Year Government Bond Yields
2.5	Long-Term Inflation Expectations
2.6	Implied Volatilities
2.7	High-Grade Corporate Bond Spreads
2.8	High-Yield Corporate Bond Spreads
2.9	Equity Indices
2.10	Twelve-Month Forward Price/Earnings Ratios
2.11	Net Foreign Purchases of U.S. Financial Assets
2.12	Emerging Market Debt Spreads
2.13	Observed and Forecast EMBI+ Spreads
2.14	EMBI Global Spreads vs. Eurodollar Interest Rate Expectations
2.15	Emerging Market Debt Returns
2.16	Spread Differentials in Emerging Market Debt
2.17	Differentials Between Corporate and Emerging Market Spreads
2.18	Emerging Market Credit Quality
2.19	Correlations of MSCI World and Emerging Market Indices
2.20	Brazil: Local Market Spreads over U.S. Treasuries
2.21	Turkey: Local Market Spreads over German Bunds
2.22	Brazil: Portfolio Investment in Local Currency Debt Instruments
2.23	Brazil: Nonresident Holdings of Government Debt Instruments
2.24	Turkey: Portfolio Investment in Local Currency Debt
2.25	Turkey: Nonresident Holdings of Government Debt Instruments
2.26	Cumulative Gross Annual Issuance of Bonds, Loans, and Equity
2.27	Quarterly Net Issuance
2.28	Cumulative Gross Annual Issuance of Bonds
2.29	Cumulative Gross Annual Issuance of Equity
2.30	Cumulative Gross Annual Issuance of Loans
2.31	Foreign Direct Investment to Emerging Markets
2.32	Emerging Market Countries: Bank Market Valuations
2.33	Total Number of Energy Options and Futures Contracts
2.34	Selected Energy Prices
2.35	United States: Household Net Worth
2.36	United States: Household Debt as a Percentage of GDP
2.37	Euro Area and United Kingdom: Ratio of Household Debt to GDP
2.38	Japan: Household Net Worth
2.39	United States: Debt to Net Worth Ratio of Nonfinancial Corporations
2.40	United States: Cash Flow of Nonfinancial Corporate Business
2.41	United States: Financing Gap of Nonfinancial Corporations
2.42	Euro Area and United Kingdom: Ratio of Nonfinancial Corporate Debt to GDP
2.43	Japan: Capital to Asset Ratio of Corporate Sector
2.44	Japan: Corporate Debt and Cash Flow Relative to GDP
2.45	Selected Countries: Banks’ Return on Equity
2.46	Large Complex Financial Institutions (LCFIs) and Commercial Banks: Market Risk Indicator (MRI)
2.47	Entire Portfolio: Market Risk Indicator (MRI) and Diversification
2.48	Difference Between Undiversified and Diversified Value at Risk
2.49	Selected Countries: Value at Risk Sensitivity
2.50	Large Complex Financial Institutions: Market Risk Indicator (MRI) and Credit Risk Indicator (CRI)
3.1	Life Expectancy at Birth
3.2	Remaining Life Expectancy at Age 65
3.3	Median Age of Population, by Country
3.4	Dependency Ratio for Selected Countries
3.5	Asset Allocation of Autonomous Pension Funds, 2001
3.6	United States: Ratio of Assets to Projected Benefit Obligations (PBOs) for the Fortune 500
3.7	Netherlands: Funding Ratio of Pension Funds
3.8	Japan: Employee Pension Funds
3.9	United States: Distribution of Corporate Defined Benefit Pension Plans by Funding Ratio, 2003
3.10	Estimated Valuation Effects on Projected Benefit Obligation (PBO) Funded Ratios
3.11	United States: Assets Under Management of Private Pension Schemes
4.1	Capital Flows to Emerging Markets
4.2	Private and Official Outflows/Inflows of Residents and Nonresidents in Emerging Markets
4.3	International Equity Issuance and FDI in China vs. All Other Emerging Market Countries
4.4	Capital Flow Trends for Crisis and Non-Crisis Countries
4.5	Cumulative Net External Debt Issuance: Crisis vs. Non-Crisis Countries
4.6	Selected Emerging Market Crisis Countries: Sudden Stops, Asset Prices, and GDP
4.7	Distance to Distress in Selected Emerging Market Crisis Countries
4.8	Reserves to Short-Term Debt Ratios and Sovereign Default Probabilities
4.9	Welfare Effects of Self-Insurance Policy
4.10	Global Imbalances
4.11	Net Private Capital Flows to Emerging Markets and Foreign Purchases of G3 Bonds and Stocks
4.12	Risk-Adjusted Rates of Return
4.13	Emerging Market Mutual and Hedge Fund Assets

On this site, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states. Dependent territories of member countries are listed alphabetically followed by a description of the constitutional relationships with their member countries.