Market Discipline

Timothy Lane

No 1992/042, IMF Working Papers from International Monetary Fund

Abstract: Under what circumstances can market forces prevent unsustainable borrowing? Effective market discipline requires that capital markets be open, that; information on the borrower’s existing liabilities be readily available, that no bailout be anticipated, and that the borrower respond to market signals. This paper explores the implications of these conditions, and reviews some relevant empirical evidence.

Keywords: WP; market discipline; markets discipline borrower; financial market liberalization; exchange rate; market lender; market perception; market forces; market access; market participant; Deposit insurance; Debt default; Debt financing; Central and Eastern Europe (search for similar items in EconPapers)
Pages: 50
Date: 1992-06-01
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