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Bank Fragility and International Capital Mobility

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  • Enrica Detragiache

Abstract

The paper examines the effects of increased financial integration on the economy and, specifically, the welfare of depositors and the business sector. A simple model of a small open economy with a fragile banking sector and imperfect capital mobility is developed. Increased international integration of the market for bank deposits makes runs on banks more likely and unambiguously hurts the domestic business sector. Depositors may gain or lose depending on the parameters. Even when depositors gain, the overall effect on the economy depends on the size of foreign assets held relative to the costs of bank crises.

Suggested Citation

  • Enrica Detragiache, 1999. "Bank Fragility and International Capital Mobility," IMF Working Papers 99/113, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/113
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    Cited by:

    1. Eric Santor, 2003. "Banking Crises and Contagion: Empirical Evidence," Staff Working Papers 03-1, Bank of Canada.
    2. De Vries, C.G., 2005. "The simple economics of bank fragility," Journal of Banking & Finance, Elsevier, vol. 29(4), pages 803-825, April.

    More about this item

    Keywords

    Financial crisis; Capital Mobility; Banking Crises; foreign asset; banking; bank runs; international integration; bank run;

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