It has been claimed that the ability of emerging markets to adopt optimal stabilization policies is hampered by a number of factors. Among them, it has been recently emphasized the role of financial instability, inefficiencies, and financial market imperfections. It is claimed here that the current financial regulatory paradigm, embodied in Basel II, may improve financial stability but reinforces cyclicality. Therefore, countries should emphasize financial efficiency since it would lead to enhanced financial stability, without increasing cyclicality.

T HIS paper sets out to analyze the empirical relationship between the structure of industrial exports and the level of income per capita across 30 countries. To do so, industrial exports are classified according to (a) the factor intensity of their production functions-for the purpose of providing an indirect test of the factor proportions theory of international trade-and (b) the income elasticity of the demand for various goods-for the purpose of testing part of Linder's (1961) hypothesis. Tariffs, subsidies, differential exchange rates, and other bafriers to trade are of crucial importance in the determination of the actual flows of goods between countries. A single variableincome per capita-therefore cannot by itself explain the structure of trade. However, since per capita income reflects the effects of a variety of economic processes and is usually regarded as an indicator of a country's level of development, I believe it worthwhile to analyse the empirical links between the structure of industrial exports and a country's level of development as measured by its per capita income. The sample of 30 countries with a per capita income above U.S. $500 in 1970 includes all the industrial countries and most of the more advanced developing countries. 1,2 I. The Factor Proportions Theory

The purpose of this study is to analyze theoretically and empirically the short-run behavior of prices and the balance of payments in a small open economy with a fixed exchange rate. Following the presentation of the theoretical framework, the experience of Mexico during 1950-73 is analyzed. The model is based on what is known as the monetary approach to the balance of payments. This approach, as is frequently presented,' deals with long-run equilibrium situations when all relative prices are fixed. This long-run equilibrium view was applied to test empirically the theory for several countries,2 using the assumption that there are no serious barriers to the international movement of capital and that all goods are traded.3 These assumptions imply that goods and capital markets are perfectly arbitraged and, therefore, that price levels and interest rates in all the countries always move together.

Changes in the money supply are expected to affect the nominal rate of interest in opposite directions: the liquidity and credit effects tend to depress the rate, while higher inflationary expectations work in the opposite direction. Theoretical studies suggest that, although liquidity and credit effects initially dominate, they are eventually more than offset by the expectations effect. These results are confirmed in countries of mild inflation. The results obtained here for a highly inflationary country--Argentina--indicate that the expectations effect is dominant and that any change in the rate of monetary disequilibrium was fully transmitted to the nominal interest rate.

Mario I. Blejer, Isabel Guerrero, The Impact of Macroeconomic Policies on Income Distribution: An Empirical Study of the Philippines, The Review of Economics and Statistics, Vol. 72, No. 3 (Aug., 1990), pp. 414-423

Mario I. Blejer, Leonardo Leiderman, On the Real Effects of Inflation and Relative-Price Variability: Some Empirical Evidence, The Review of Economics and Statistics, Vol. 62, No. 4 (Nov., 1980), pp. 539-544