Bank Fragility and International Capital Mobility

IMF Working Paper No. 99/113

Posted: 4 Jan 2000

See all articles by Enrica Detragiache

Enrica Detragiache

International Monetary Fund (IMF) - European Department

Multiple version iconThere are 2 versions of this paper

Date Written: August 1999


The paper studies the effects of increased international financial integration when banks are fragile, with a focus on the welfare of bank depositors and of 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 bank deposit market makes fundamental-driven bank runs more likely. The business sector is unambiguously worse off, while bank depositors may lose or gain depending on the parameters. Even if depositors gain, the overall effect on the economy may be negative if net holdings of foreign assets are small relative to the deadweight costs of banking crises.

JEL Classification: F36, F41, G21

Suggested Citation

Detragiache, Enrica, Bank Fragility and International Capital Mobility (August 1999). IMF Working Paper No. 99/113. Available at SSRN:

Enrica Detragiache (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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