Catalytic Finance: When Does It Work?

Stephen Morris and Hyun Song Shin

No 1400, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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 (search for similar items in EconPapers)
JEL-codes: C7 D82 F33 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003-02
New Economics Papers: this item is included in nep-gth, nep-ifn, nep-mfd and nep-rmg
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Citations: View citations in EconPapers (26)

Published in Journal of International Economics (2006), 70: 161-177

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Journal Article: Catalytic finance: When does it work? (2006)
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