Bank Fragility and International Capital Mobility

Author/Editor:

Enrica Detragiache

Publication Date:

August 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 99/113

Subject:

English

Publication Date:

August 1, 1999

ISBN/ISSN:

9781451853681/1018-5941

Stock No:

WPIEA1131999

Format:

Paper

Pages:

20

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