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Recent financial crises in east Asia and elsewhere have illustrated the problems that plague emergency liquidity arrangements and the 'lender of last resort' role of the International Monetary Fund and other international institutions. In particular, these act under conditions of extreme uncertainty, where potential sovereign borrowers, as well as private financial institutions, are 'kept in the dark' regarding the intentions of the emergency lenders and the amounts and terms of emergency liquidity that can be tapped. From April 1999, longer-term credit lines are being offered by the IMF, designed to be awarded to 'healthy' countries before they experience contagion or distress. The paper evaluates the advantages of this form of IMF lending and this new trend in IMF operations. It is argued that provision of IMF financing through such long-term lending facilities is better in some senses than shorter-term lending. Long-term contracts reduce the uncertainty with respect to IMF intentions. Moral hazard problems are reduced for the borrowing country and financial markets know the future level and terms of IMF support. Another advantage is that long-term loan contracts improve the allocation of resources within the borrowing country. Much as private-sector facility lending is the dominant mode of finance in many markets, so facility lending has efficiency advantages when it is provided by the IMF. This efficiency advantage is derived formally. It is shown that sovereign borrowers are actually better off when utilizing these as backup lines of credit, instead of emergency borrowing that is conducted after distress occurs. Facility lending by international institutions can lead to a welfare improvement and superior resource allocation for sovereign borrowers. The intuition for this is that when financial distress drives these borrowers to increase their debt, risk premia in borrowing rates would not rise, at least up to the limits established by the size of the facility. Keywords: IMF; Sovereign debt; Credit facilities; Signalling

While the complexity of underwriting syndicates is well-known there has been very little empirical analysis of syndicate structure. The short-term Eurocredit market is a promising market for the analysis of industrial structure because underwriting syndicates generally come in a two-tier structure. The structures of syndicates in this market are analyzed here empirically. Our evidence suggests that the lead managers in these syndicates seem to be recruited primarily for paycosts of risk bearing and sharing, while the regular managers appear to be recruited primarily for the purpose of dealing with expanded underwriting distribution, risks held constant. Contract parameters that affect syndicate size and structure are examined in detail for various instruments. (JEL G20). Copyright [C] 1996 Elsevier Science Ltd

A simple model of hedging financial risk showing the superior hedging capabilities of currency swaps is presented. A superior loan-collateral matching is effected by currency swaps because both parties implicitly exchange their assests with one another. Swaps also result in lower borrowing costs to both parties. The mutual double bonding arrangement that arises from a currency swap guarantees its enforceability.

The private-placement debt market has grown dramatically in recent years. Private placements have a "competitive advantage" over public placements in being exempt from many regulations, including disclosure procedures and auditing requirements. Here, a model is developed to explain the growth in the private-placement market. Corporate borrowers choose between public and private placement of debt so as to minimize borrowing costs. Borrowers in the public-placement market incur higher regulatory cost, but are also able to signal accurately their true risk of default. In private placements, there is an asymmetric information problem. This results in an equilibrium where the debt market gets partitioned between private and public placements. It is shown that raising regulatory costs will lead to an expansion of the market share of private placements. It will also lead to an increase in the overall default rate on corporate debt. [ABSTRACT FROM AUTHOR]

In recent years, off-balance sheet credit facilities have grown dramatically and now represent the most prevalent contractual framework within which commercial and industrial borrowing from banks occurs. One important role of these facilities is to provide liquidity to bank customers that acts as a substitute for on-balance sheet liquidity or "money." This paper discusses empirical evidence of the substitutability between on- and off-balance sheet liquidity for the business sector. It also discusses the implications of this relationship for interest rate determination and monetary policy. In particular, it is argued that monetary policy should pay more attention to off-balance sheet liquidity when choosing targets and operating procedures. [ABSTRACT FROM AUTHOR]

Analysis of housing demand should cover both consumption elements and financial considerations, since housing acts as both a consumption good and an investment good. It should be noted in particular that part of the expense of purchasing housing is the assumption of significant portfolio risk, stemming from households' limited capacity to diversify portfolios once housing purchases are made. The selection of timing a transition from rental housing to home ownership also reflects both financial and consumption elements. Households have some motivation to delay ownership in order to accumulate more wealth beyond that which is needed to make a down payment. Non-housing wealth can be increased and invested in financial assets to create a partial hedge against the exposed long position in housing associated with home ownership.

Housing finance structures available within imperfect capital markets are analyzed, with particular attention paid to mortgage amortization schedules in order to identify the amortization rate most beneficial to the buyer. Optimal amortization schedules are developed for ideal mortgage repayment terms, and conditions under which balloon payment mortgages function best are described. Mathematical modeling and equations involved in the research consider such factors as: income and wealth of the home purchaser, variance within asset values, mortgage interest, expected return on assets, expected return on housing, price covariance factors, changes in mortgage limits, and risk aversion.

An analysis of the comparative advantages of various forms of loan indexation indicated that a combination of maturity and interest rate indexation was preferable to interest rate indexation alone. Partial interest rate indexation proved of higher optimality than either complete interest rate indexation or no indexation.

This article analyses income inequality in Israel and the role of ethnicity in creating or explaining it. It shows that in spite of relatively large ‘raw’ disparities in mean incomes across the ethnic groups, when controlling for other non-ethnic factors it is not generally the case that Arabs underperform in the Israeli labour markets compared with Jews, and in some cases Arabs outperform Jews, especially for men. Returns on education also do not appear to be lower for Arabs, other things being equal. In spite of the stereotypes, Ashkenazim generally do not outperform Mizrahim, or at most do so to a very small degree. The main ‘advantaged’ ethnic group are the native-born sabra Israelis. The main ‘disadvantaged’ demographic group are recent immigrants. Somewhat surprisingly, Ethiopians do not underperform compared with other immigrants, other things being equal. [ABSTRACT FROM AUTHOR]

In most countries, the dissolution of marriage through divorce and marital separation is growing. Such trends affect many things, including of course, child rearing, but also housing tenure. Relatively little is known about the housing tenure results of divorce outside Western countries and even less is known in general about the "separated", who are often not listed as a separate demographic group in most official data sets. Here, the housing tenure solutions and decisions by the divorced and separated are compared with one another and the married, by using Israeli official data, which treat the separated as a distinct demographic group. The factors that affect the tenure results are separately explored for males and females from the different marital groups. It is seen that the separated differ in some interesting ways from the divorced, and their tenure situation after separation is affected by different explanatory variables. The tenure results for each demographic group seem to reflect the complex interplay of numerous factors, including income and educational levels, age, and ethnicity. Some of the explanatory factors operate in surprising ways. For example, higher levels of education, controlling for income and salary, are associated with lower likelihood of ownership, in contrast with what has been found in other countries. It is possible that, in some cases, the unexpected directions and magnitudes of the impacts of explanatory factors may be capturing the results of legal divorce and separation procedures and negotiations. [ABSTRACT FROM AUTHOR]

This article focuses on the perverse suburbanization in Jerusalem. When urban population growth is highly erratic, standard patterns of density and land use may be disrupted, or even reversed, with density increasing with distance from the center. Some casual evidence suggests this may have been the case for some Israeli cities. The Hebrew word for suburb (parvar) long carried opposite connotations to the usual concept of suburb. In recent years however, parvar seems to be reversing connotations and is used for low density, middle-class neighborhoods, perhaps reflecting changing economic reality. It has been shown that Jerusalem developed a third ring of low-quality, low income housing during the period of very rapid growth which took place following independence in 1948. "Perverse" suburbanization was demonstrated, using a number of criteria. Since 1955, growth races have been slower. There are signs that a fourth ring is emerging, as Jerusalem returns to normal suburbanization patterns.