IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/99-100.html
   My bibliography  Save this paper

Global Moral Hazard, Capital Account Liberalization and the “Overlending Syndrome”

Author

Listed:
  • Eduardo Levy Yeyati

Abstract

The removal of government guarantees in borrowing countries does not eliminate the moral hazard problem posed by the existence of deposit guarantees in lender countries. The paper shows that, after restrictions on international capital flows are lifted, banks in low-risk developed countries benefit from lending funds captured in home markets at low deposit rates to high-risk/high-yield projects in emerging economies, even though these projects command lower expected returns. This, in turn, has a negative impact on bank profitability in the borrowing country, even when foreign funds are intermediated through domestic banks. The results are consistent with the surge in international bank lending flows that led to recent banking crises in Asia.

Suggested Citation

  • Eduardo Levy Yeyati, 1999. "Global Moral Hazard, Capital Account Liberalization and the “Overlending Syndrome”," IMF Working Papers 99/100, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/100
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=3164
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qin, Xiao & Luo, Chengying, 2014. "Capital account openness and early warning system for banking crises in G20 countries," Economic Modelling, Elsevier, vol. 39(C), pages 190-194.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:99/100. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi). General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.