Transparency, Liberalization, and Banking Crisis
The authors investigate how transparency affects the probability of a financial crisis. They construct a model in which banks cannot distinguish between aggregate shocks and government policy, on the one hand, and firm' quality, on the other....
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/02/437731/transparency-liberalization-banking-crisis http://hdl.handle.net/10986/19851 |
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okr-10986-198512021-04-23T14:03:47Z Transparency, Liberalization, and Banking Crisis Mehrez, Gil Kaufmann, Daniel AGENTS BANK ASSETS BANK CLOSURES BANK LENDING BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKS BANQUE DE FRANCE BONDS BOOK VALUE BOOMS BORROWING CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL MARKETS COMPETITIVENESS CONTAGION CREDIT RATIONING CROSS-COUNTRY EXPERIENCE DEPOSITORS DEPOSITS DEREGULATION DOMESTIC CREDIT ECONOMETRICS ECONOMIC MODELS ECONOMIC RESEARCH ECONOMICS EMERGING MARKETS EXPECTED RETURN EXTERNALITIES FEDERAL RESERVE SYSTEM FINANCIAL CONTAGION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS FISCAL POLICY FOREIGN BANKS FOREIGN EXCHANGE FREE ENTRY GDP GLOBALIZATION GOVERNMENT GUARANTEES GROWTH RATE HOUSING IMPERFECT INFORMATION INFLATION INFLATION RATE INSURANCE INTEREST RATE INTEREST RATES INTERSTATE BANKING LIQUIDITY M2 MACROECONOMIC POLICY MARGINAL PRODUCTIVITY MORAL HAZARD OLIGOPOLY OPEN ECONOMIES PERFECT COMPETITION POLITICAL ECONOMY PREDICTIONS PRIVATIZATION PRODUCTIVITY PROGRAMS REAL INTEREST RATE RESERVE ASSETS RESERVE REQUIREMENTS RESERVES RISK NEUTRAL SECURITIES SECURITIES MARKETS STABILIZATION TRANSPARENCY UNIVERSAL BANKS The authors investigate how transparency affects the probability of a financial crisis. They construct a model in which banks cannot distinguish between aggregate shocks and government policy, on the one hand, and firm' quality, on the other. Banks may therefore overestimate firms' returns and increase credit above the level that would be optimal given the firms' returns. Once banks discover their large exposure, they are likely to roll over loans rather than declare their losses. This delays the crisis but increases its magnitude. The empirical evidence, based on data for 56 countries in 1977-97, supports this theoretical model. The authors find that lack of transparency increases the probability of a crisis following financial liberalization. This implies that countries should focus on increasing transparency of economic activity and government policy, as well as increasing transparency n the financial sector, particularly during a period of transition such as financial liberalization. 2014-08-28T19:36:08Z 2014-08-28T19:36:08Z 2000-02 http://documents.worldbank.org/curated/en/2000/02/437731/transparency-liberalization-banking-crisis http://hdl.handle.net/10986/19851 English en_US Policy Research Working Paper;No. 2286 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AGENTS BANK ASSETS BANK CLOSURES BANK LENDING BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKS BANQUE DE FRANCE BONDS BOOK VALUE BOOMS BORROWING CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL MARKETS COMPETITIVENESS CONTAGION CREDIT RATIONING CROSS-COUNTRY EXPERIENCE DEPOSITORS DEPOSITS DEREGULATION DOMESTIC CREDIT ECONOMETRICS ECONOMIC MODELS ECONOMIC RESEARCH ECONOMICS EMERGING MARKETS EXPECTED RETURN EXTERNALITIES FEDERAL RESERVE SYSTEM FINANCIAL CONTAGION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS FISCAL POLICY FOREIGN BANKS FOREIGN EXCHANGE FREE ENTRY GDP GLOBALIZATION GOVERNMENT GUARANTEES GROWTH RATE HOUSING IMPERFECT INFORMATION INFLATION INFLATION RATE INSURANCE INTEREST RATE INTEREST RATES INTERSTATE BANKING LIQUIDITY M2 MACROECONOMIC POLICY MARGINAL PRODUCTIVITY MORAL HAZARD OLIGOPOLY OPEN ECONOMIES PERFECT COMPETITION POLITICAL ECONOMY PREDICTIONS PRIVATIZATION PRODUCTIVITY PROGRAMS REAL INTEREST RATE RESERVE ASSETS RESERVE REQUIREMENTS RESERVES RISK NEUTRAL SECURITIES SECURITIES MARKETS STABILIZATION TRANSPARENCY UNIVERSAL BANKS |
| spellingShingle |
AGENTS BANK ASSETS BANK CLOSURES BANK LENDING BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING SYSTEM BANKS BANQUE DE FRANCE BONDS BOOK VALUE BOOMS BORROWING CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL MARKETS COMPETITIVENESS CONTAGION CREDIT RATIONING CROSS-COUNTRY EXPERIENCE DEPOSITORS DEPOSITS DEREGULATION DOMESTIC CREDIT ECONOMETRICS ECONOMIC MODELS ECONOMIC RESEARCH ECONOMICS EMERGING MARKETS EXPECTED RETURN EXTERNALITIES FEDERAL RESERVE SYSTEM FINANCIAL CONTAGION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS FISCAL POLICY FOREIGN BANKS FOREIGN EXCHANGE FREE ENTRY GDP GLOBALIZATION GOVERNMENT GUARANTEES GROWTH RATE HOUSING IMPERFECT INFORMATION INFLATION INFLATION RATE INSURANCE INTEREST RATE INTEREST RATES INTERSTATE BANKING LIQUIDITY M2 MACROECONOMIC POLICY MARGINAL PRODUCTIVITY MORAL HAZARD OLIGOPOLY OPEN ECONOMIES PERFECT COMPETITION POLITICAL ECONOMY PREDICTIONS PRIVATIZATION PRODUCTIVITY PROGRAMS REAL INTEREST RATE RESERVE ASSETS RESERVE REQUIREMENTS RESERVES RISK NEUTRAL SECURITIES SECURITIES MARKETS STABILIZATION TRANSPARENCY UNIVERSAL BANKS Mehrez, Gil Kaufmann, Daniel Transparency, Liberalization, and Banking Crisis |
| relation |
Policy Research Working Paper;No. 2286 |
| description |
The authors investigate how transparency
affects the probability of a financial crisis. They
construct a model in which banks cannot distinguish between
aggregate shocks and government policy, on the one hand, and
firm' quality, on the other. Banks may therefore
overestimate firms' returns and increase credit above
the level that would be optimal given the firms'
returns. Once banks discover their large exposure, they are
likely to roll over loans rather than declare their losses.
This delays the crisis but increases its magnitude. The
empirical evidence, based on data for 56 countries in
1977-97, supports this theoretical model. The authors find
that lack of transparency increases the probability of a
crisis following financial liberalization. This implies that
countries should focus on increasing transparency of
economic activity and government policy, as well as
increasing transparency n the financial sector, particularly
during a period of transition such as financial liberalization. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Mehrez, Gil Kaufmann, Daniel |
| author_facet |
Mehrez, Gil Kaufmann, Daniel |
| author_sort |
Mehrez, Gil |
| title |
Transparency, Liberalization, and Banking Crisis |
| title_short |
Transparency, Liberalization, and Banking Crisis |
| title_full |
Transparency, Liberalization, and Banking Crisis |
| title_fullStr |
Transparency, Liberalization, and Banking Crisis |
| title_full_unstemmed |
Transparency, Liberalization, and Banking Crisis |
| title_sort |
transparency, liberalization, and banking crisis |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/02/437731/transparency-liberalization-banking-crisis http://hdl.handle.net/10986/19851 |
| _version_ |
1764441679262121984 |