Financial liberalization can make your economy more resilient if...
A new paper compares changes in financing by international banks to domestic banks after the 1998 Russian debt crisis. The author finds that financing increased to banks with international equity holders when compared with their purely domestic counterparts.
Financial liberalization can make you more resilient to global credit shocks, but only if you invite foreigners rather than just borrow their money.
Printer-friendly version
Comments
I am sorry for Philipp Schnabl who happens here to be today’s ti
I am sorry for Philipp Schnabl who happens here to be today’s tip of the iceberg but I must once again bring up the question.. who says that “resilience” is something particularly good for development and a developing country? Risk is the oxygen of development. Have you not heard "No woman no cry"? That song was not written to stop us from crying
This paper is part of that risk-adverse culture capable of always welcoming risk and risk takers in discourses, but that then does nothing but fight risks.
Please do not forget that the World Bank is a developing bank, not a financial sector sustainability institution. If the IMF wants to be that, well that’s their problem, not ours.
For instance, the abstract says that this paper finds “lower bankruptcy rate among firms borrowing from banks with international equity holders than among firms borrowing from banks without international equity holders” and it begs both the question of why and if this necessarily a good thing.
When are you going to stop measuring and lamenting the costs of a bank crisis without even looking to see and measure whether the full trip, the boom and bust, has been worthwhile and has left some good memories for the country at large?
The paper reminds us also of an issue that hopefully is not too timely. What if foreign banks, by means of their own risk-standing, introduce new risks in the economy?
Post new comment