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

  • Hübler, Olaf Hübler
  • Menkhoff, Lukas
  • Suwanaporn, Chodechai

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 Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) 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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