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Micro-Level Evidence on the Role of MoralHazard in the Asian Financial Crisis

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Author Info
HONIG, Adam ()
JAIN-CHANDRA, Sonali ()

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Abstract

This paper examines the role of government guarantees to domestic banks in generating moral hazard in pre-crisis East Asian economies. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than otherwise identical banks that did not enjoy such guarantees. In order to determine empirically the existence of moral hazard among bank managers, we examine whether managers of protected banks assumed more risk than their counterparts at non-protected banks. Using micro-level data, we find strong evidence of moral hazard among bank managers and limited evidence of moral hazard among bank creditors

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Publisher Info
Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 6 (2006)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:eaa:aeinde:v:6:y:2006:i:1_16

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Related research
Keywords: Moral hazard; Asian financial crisis.;

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Sathye, M, 2002. "The Impact of Foreign Banks on Market Concentration: The Case of India," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 2(1). [Downloadable!]
  2. Timothy D. Lane & Steven Phillips, 2000. "Does IMF Financing Result in Moral Hazard?," IMF Working Papers 00/168, International Monetary Fund.
  3. Enrica Detragiache & Asli Demirgüç-Kunt, 1997. "The Determinants of Banking Crises - Evidence from Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
  4. Demirguc-Kunt, Asl1 & Huizinga, Harry, 1999. "Market discipline and financial safety net design," Policy Research Working Paper Series 2183, The World Bank. [Downloadable!]
    Other versions:
  5. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36. [Downloadable!]
    Other versions:
  6. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
    Other versions:
  7. Chang, Ha-Joon, 2000. "The Hazard of Moral Hazard: Untangling the Asian Crisis," World Development, Elsevier, vol. 28(4), pages 775-788, April. [Downloadable!] (restricted)
  8. Sarno, Lucio & Taylor, Mark P., 1999. "Moral hazard, asset price bubbles, capital flows, and the East Asian crisis:: the first tests," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 637-657, August. [Downloadable!] (restricted)
  9. Robert Dekle & Kenneth M. Kletzer, 2001. "Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia," NBER Working Papers 8322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Luc Laeven, 2002. "Bank Risk and Deposit Insurance," World Bank Economic Review, Oxford University Press, vol. 16(1), pages 109-137, June.
  11. Frederic S. Mishkin, 2001. "Financial Policies and the Prevention of Financial Crises in Emerging Market Countries," NBER Working Papers 8087, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Mishkin, Frederic S., 1999. "Lessons from the Asian crisis," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 709-723, August. [Downloadable!] (restricted)
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  13. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Jeffrey A. Frankel & Nouriel Roubini, 2001. "The Role of Industrial Country Policies in Emerging Market Crises," NBER Working Papers 8634, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Joon-Ho Hahm & Frederic S. Mishkin, 2000. "Causes of the Korean Financial Crisis: Lessons for Policy," NBER Working Papers 7483, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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