Catalytic Finance: When Does it Work?

21 Pages Posted: 26 Feb 2003

See all articles by Stephen Morris

Stephen Morris

affiliation not provided to SSRN

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: February 2003

Abstract

In a simple model of currency crises caused by creditor coordination failure, we show that bailouts that reduce ex post inefficiency will sometimes create ex ante moral hazard but will sometimes enhance the incentives for governments to take preventative actions. This model helps us understand a debate about the role of the IMF in catalyzing lending to developing countries.

Keywords: Moral Hazard, Financial Crisis, International Financial Architecture, Global Games

JEL Classification: C72, D82, F33

Suggested Citation

Morris, Stephen Edward and Shin, Hyun Song, Catalytic Finance: When Does it Work? (February 2003). Cowles Foundation Discussion Paper No. 1400. Available at SSRN: https://ssrn.com/abstract=383604

Stephen Edward Morris (Contact Author)

affiliation not provided to SSRN

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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