Bank Fragility and International Capital Mobility

20 Pages Posted: 15 Feb 2006

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 examines the effects of increased financial integration on the economy and, specifically, the welfare of depositors and 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 market for bank deposits makes runs on banks more likely and unambiguously hurts the domestic business sector. Depositors may gain or lose depending on the parameters. Even when depositors gain, the overall effect on the economy depends on the size of foreign assets held relative to the costs of bank crises.

Keywords: Capital Mobility Banking Crises

JEL Classification: F36 F41 G21

Suggested Citation

Detragiache, Enrica, Bank Fragility and International Capital Mobility (August 1999). IMF Working Paper, Vol. , pp. 1-20, 1999. 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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