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Financial Liberalisation in Emerging Markets: How Does Bank Lending Change?

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Author Info
Hübler, Olaf Hübler
Menkhoff, Lukas
Suwanaporn, Chodechai

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Abstract

Financial liberalisation has often failed in the past due to underestimated problems of structural change. We analyse such changes in lending behaviour of Thai commercial banks during a liberalisation phase by way of unique micro data. Liberalisation has expected positive effects, such as lowering the interest rate spread and collateral requirements. Liberalisation causes structural change, such as a decline in collateral-based and relationship banking. However, the liberalisation evidence is consistent with more risk taking, such as lending to more risky projects and less protection against default. The Thai experience suggests obvious policy lessons.

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Paper provided by Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover with number dp-364.

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Length: 28 pages
Date of creation: May 2007
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Handle: RePEc:han:dpaper:dp-364

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Related research
Keywords: financial liberalisation; lending decisions; emerging economies; Thailand;

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Find related papers by JEL classification:
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
F30 - International Economics - - International Finance - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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