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Financial Sector Returns and Creditor Moral Hazard: Evidence from Indonesia, Korea, and Thailand Author info | Abstract | Publisher info | Download info | Related research | Statistics Jian Tong ()
Chenggang Xu ()
This paper introduces a framework of investor behavior in which investors form their expectations regarding the credibility of a prospective IMF program in reforming the financial sector characterized by domestic implicit guarantees. We examine the changes in financial sector returns in response to IMF-related news such as announcements of program negotiations and approval to infer investor perception regarding the Fund support associated with the program. We test the implications of our framework based on the East Asian crisis of the late 1990s. Using daily financial sector returns from Indonesia, Korea, and Thailand, we find that news of program negotiations and approval increases financial sector returns in Indonesia and Korea. The findings are consistent with investor perception that negotiated IMF programs are non-credible due to expected continuation of domestic implicit guarantees during the future Fund
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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number
2004-687.
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Length: 26 pages
Date of creation: 01 May 2004Date of revision:
Handle: RePEc:wdi:papers:2004-687Contact details of provider: Postal: 724 E. University Ave. Wyly Hall, Floor 1, Ann Arbor, Michigan 48109-1234 Phone: 734 615 4566 Fax: (734) 763-5850 Email: Web page: http://www.wdi.umich.edu More information through EDIRC
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Keywords: Moral Hazard ; the IMF ; Asian crisis ; Financial markets ; Other versions of this item:
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F34 - International Economics - - International Finance - - - International Lending and Debt Problems G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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