Abstract

http://ssrn.com/abstract=884718
 
 

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Financial Crisis in Developing Countries and Structural Weaknesses of the Financial System


Guillermo Le Fort


Bard College

April 18, 1989

IMF Working Paper No. 89/33

Abstract:     
This paper examines the generation of financial crises in developing economies and shows that the microeconomic structure of the financial sector is a crucial factor in creating the conditions for a crisis. Structural problems of the financial system in developing countries, including implicit insurance on bank liabilities, limitations of capital markets, and lack of appropriate regulations, are sources of financial fragility. The paper concludes that close supervision of bank loans is needed to eliminate these distortions, and the optimal intervention consists of imposing an adjustable bankruptcy penalty on banking activity or charging a fair insurance premium on bank liabilities.

Number of Pages in PDF File: 46

JEL Classification: 1216, 3112

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Date posted: February 15, 2006  

Suggested Citation

Le Fort, Guillermo, Financial Crisis in Developing Countries and Structural Weaknesses of the Financial System (April 18, 1989). IMF Working Paper, Vol. , pp. 1-44, 1989. Available at SSRN: http://ssrn.com/abstract=884718

Contact Information

Guillermo Le Fort (Contact Author)
Bard College
Blithewood
Annandale-on-Hudson, NY 12504
United States
845-758-7700 (Phone)
845-758-1149 (Fax)
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