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Market Discipline at Thai Banks before the Asian Crisis

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  • Jiranyakul, Komain
  • Opiela, Timothy

Abstract

This paper tests the effect of systemic risk on deposit market discipline by interacting proxies for systemic risk with bank-specific default-risk variables. Discipline is measured by estimating a supply of deposit funds function at Thai banks from 1992 to 1997. The results show that supply decreases as bank-specific risk increases. Also, the sensitivity of funds to changes in bank-specific risk increases as systemic risk rises. Additionally, depositors decrease their sensitivity to deposit rates, decreasing the ability of banks to offset deposit drains by raising rates. Although banking system risk increases, discipline decreases the share of deposits at the riskiest banks.

Suggested Citation

  • Jiranyakul, Komain & Opiela, Timothy, 2014. "Market Discipline at Thai Banks before the Asian Crisis," MPRA Paper 54492, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54492
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    File URL: https://mpra.ub.uni-muenchen.de/54492/1/MPRA_paper_54492.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market discipline; market monitoring; systemic risk; banking and currency crises;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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