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Banking

PDF: Domestic Bank Regulation and Financial Crises: Theory and ...

Download 20 times Source: econ.ucsc.edu // Topic: Banking File Size: 0.32 kb // Total of Page: - Page(s) Last download by ShenasiNaki Last download on: 3 weeks ago Share this info: Short Desciption: The authors find that proxies for bank regulation such as rule of law, quality of. bureaucracy, and degree of corruption perform an important role in ... Content Inside: Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia Robert Dekle University of Southern California Kenneth Kletzer University of California, Santa Cruz April 2001 Abstract A model of the domestic financial intermediation of foreign capital inf lows based on agency costs is developed for studying financial crises in emerging markets. In equilibrium for the model economy, the banking system becomes progressively more fragile under imperfect prudential regulation and public sector loan guarantees until a crisis occurs with an expected reversal of capital f lows. The crisis in this model evolves endogenously as the banking system becomes increasingly vulnerable through the renegotiation of firm debts. Firm revenues are subject to idiosyncratic firm-specific technology shocks, but there are no aggregate shocks. The model generates dynamic relationships between foreign capital inf lows, domestic investment, firm debt and the value of firm and bank equity in an endogenous growth model. Prior to crisis, foreign capital