Financial Policies and the Prevention of Financial Crises in Emerging Market Economies

The author defines a financial crisis as a disruption in financial markets in which adverse selection and moral hazard problems become much worse, so that financial markets are unable to efficiently channel funds to those who have the most producti...

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Main Author:	Mishkin, Frederic S.
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCOUNTING ADVERSE SELECTION ASSET PRICES ASYMMETRIC INFORMATION BALANCE OF PAYMENTS BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK FAILURE BANK HOLDING COMPANY BANK PANICS BANKING CRISES BANKING PANICS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BONDS BORROWING CAPITAL BASE CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CERTIFICATES OF DEPOSIT CHECKING COMMERCIAL BANKS CONTAGION CREDIT MARKETS CREDIT RATIONING CREDIT RISK CURRENCY CRISES DEBT DEFLATION DEPOSITS DEVALUATION DISINFLATION ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKET ECONOMIES EMERGING MARKETS EQUITY CAPITAL EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RATES FACE VALUE FEDERAL DEPOSIT INSURANCE FEDERAL DEPOSIT INSURANCE CORPORATION FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL POLICIES FINANCIAL REFORM FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SECTOR BALANCE FINANCIAL STABILITY FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL DEFICITS FISCAL POLICY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FREE RIDER FUTURE VALUE GDP GOVERNMENT SECURITIES GROWTH RATE ILLIQUIDITY INFLATION INSTITUTIONAL STRUCTURE INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES INVESTMENT OPPORTUNITIES LEGISLATION MANDATES MERCHANT BANKS MONETARY POLICY MORAL HAZARD MORAL HAZARD PROBLEMS MUTUAL FUNDS NET ASSETS NET WORTH NOMINAL INTEREST RATES NONBANK FINANCIAL INSTITUTIONS NONPERFORMING LOANS POLICY RESEARCH PORTFOLIOS PRESENT VALUE PRICE STABILITY PRIVATE SECTOR PRIVATIZATION REAL OUTPUT REGULATORY FORBEARANCE RISK TAKING SAVINGS SECURITIES SECURITIES MARKETS SHARP DETERIORATION STATUTORY REQUIREMENTS STOCK PRICES STOCKHOLDERS SUBSIDIARIES THRIFT INSTITUTIONS
Online Access:	http://documents.worldbank.org/curated/en/2001/10/1614834/financial-policies-prevention-financial-crises-emerging-market-economies http://hdl.handle.net/10986/19532

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recordtype	oai_dc
spelling	okr-10986-195322021-04-23T14:03:43Z Financial Policies and the Prevention of Financial Crises in Emerging Market Economies Mishkin, Frederic S. ACCOUNTING ADVERSE SELECTION ASSET PRICES ASYMMETRIC INFORMATION BALANCE OF PAYMENTS BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK FAILURE BANK HOLDING COMPANY BANK PANICS BANKING CRISES BANKING PANICS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BONDS BORROWING CAPITAL BASE CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CERTIFICATES OF DEPOSIT CHECKING COMMERCIAL BANKS CONTAGION CREDIT MARKETS CREDIT RATIONING CREDIT RISK CURRENCY CRISES DEBT DEFLATION DEPOSITS DEVALUATION DISINFLATION ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKET ECONOMIES EMERGING MARKETS EQUITY CAPITAL EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RATES FACE VALUE FEDERAL DEPOSIT INSURANCE FEDERAL DEPOSIT INSURANCE CORPORATION FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL POLICIES FINANCIAL REFORM FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SECTOR BALANCE FINANCIAL STABILITY FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL DEFICITS FISCAL POLICY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FREE RIDER FUTURE VALUE GDP GOVERNMENT SECURITIES GROWTH RATE ILLIQUIDITY INFLATION INSTITUTIONAL STRUCTURE INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES INVESTMENT OPPORTUNITIES LEGISLATION MANDATES MERCHANT BANKS MONETARY POLICY MORAL HAZARD MORAL HAZARD PROBLEMS MUTUAL FUNDS NET ASSETS NET WORTH NOMINAL INTEREST RATES NONBANK FINANCIAL INSTITUTIONS NONPERFORMING LOANS POLICY RESEARCH PORTFOLIOS PRESENT VALUE PRICE STABILITY PRIVATE SECTOR PRIVATIZATION REAL OUTPUT REGULATORY FORBEARANCE RISK TAKING SAVINGS SECURITIES SECURITIES MARKETS SHARP DETERIORATION STATUTORY REQUIREMENTS STOCK PRICES STOCKHOLDERS SUBSIDIARIES THRIFT INSTITUTIONS The author defines a financial crisis as a disruption in financial markets in which adverse selection and moral hazard problems become much worse, so that financial markets are unable to efficiently channel funds to those who have the most productive investment opportunities. As financial markets become unable to function efficiently, economic activity sharply contracts. Factors that promote financial crises include, mainly, a deterioration in financial sector balance sheets, increases in interest rates and in uncertainty, and deterioration in nonfinancial balance sheets because of changes in asset prices. Financial policies in 12 areas could help make financial crises less likely in emerging market economies, says the author. He discusses: Prudential supervision. Accounting and disclosure requirements. Legal and judicial systems. Market-based discipline. Entry of foreign banks. Capital controls. Reduction of the role of state-owned financial institutions. Restrictions on foreign-dominated debt. The elimination of too-big-to-fail practices in the corporate sector. The proper sequencing of financial liberalization. Monetary policy and price stability. Exchange rate regimes and foreign exchange reserves. If the political will to adopt sound policies in these areas grows in emerging market economies, their financial systems should become healthier, with substantial gains both from greater economic growth and smaller economic fluctuations. 2014-08-20T20:57:11Z 2014-08-20T20:57:11Z 2001-10 http://documents.worldbank.org/curated/en/2001/10/1614834/financial-policies-prevention-financial-crises-emerging-market-economies http://hdl.handle.net/10986/19532 English en_US Policy Research Working Paper;No. 2683 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING ADVERSE SELECTION ASSET PRICES ASYMMETRIC INFORMATION BALANCE OF PAYMENTS BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK FAILURE BANK HOLDING COMPANY BANK PANICS BANKING CRISES BANKING PANICS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BONDS BORROWING CAPITAL BASE CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CERTIFICATES OF DEPOSIT CHECKING COMMERCIAL BANKS CONTAGION CREDIT MARKETS CREDIT RATIONING CREDIT RISK CURRENCY CRISES DEBT DEFLATION DEPOSITS DEVALUATION DISINFLATION ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKET ECONOMIES EMERGING MARKETS EQUITY CAPITAL EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RATES FACE VALUE FEDERAL DEPOSIT INSURANCE FEDERAL DEPOSIT INSURANCE CORPORATION FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL POLICIES FINANCIAL REFORM FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SECTOR BALANCE FINANCIAL STABILITY FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL DEFICITS FISCAL POLICY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FREE RIDER FUTURE VALUE GDP GOVERNMENT SECURITIES GROWTH RATE ILLIQUIDITY INFLATION INSTITUTIONAL STRUCTURE INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES INVESTMENT OPPORTUNITIES LEGISLATION MANDATES MERCHANT BANKS MONETARY POLICY MORAL HAZARD MORAL HAZARD PROBLEMS MUTUAL FUNDS NET ASSETS NET WORTH NOMINAL INTEREST RATES NONBANK FINANCIAL INSTITUTIONS NONPERFORMING LOANS POLICY RESEARCH PORTFOLIOS PRESENT VALUE PRICE STABILITY PRIVATE SECTOR PRIVATIZATION REAL OUTPUT REGULATORY FORBEARANCE RISK TAKING SAVINGS SECURITIES SECURITIES MARKETS SHARP DETERIORATION STATUTORY REQUIREMENTS STOCK PRICES STOCKHOLDERS SUBSIDIARIES THRIFT INSTITUTIONS
spellingShingle	ACCOUNTING ADVERSE SELECTION ASSET PRICES ASYMMETRIC INFORMATION BALANCE OF PAYMENTS BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK FAILURE BANK HOLDING COMPANY BANK PANICS BANKING CRISES BANKING PANICS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BONDS BORROWING CAPITAL BASE CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL REQUIREMENTS CENTRAL BANK CERTIFICATES OF DEPOSIT CHECKING COMMERCIAL BANKS CONTAGION CREDIT MARKETS CREDIT RATIONING CREDIT RISK CURRENCY CRISES DEBT DEFLATION DEPOSITS DEVALUATION DISINFLATION ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ECONOMIC RESEARCH EMERGING MARKET ECONOMIES EMERGING MARKETS EQUITY CAPITAL EXCHANGE RATE EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RATES FACE VALUE FEDERAL DEPOSIT INSURANCE FEDERAL DEPOSIT INSURANCE CORPORATION FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL POLICIES FINANCIAL REFORM FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SECTOR BALANCE FINANCIAL STABILITY FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL DEFICITS FISCAL POLICY FOREIGN BANKS FOREIGN CURRENCY FOREIGN EXCHANGE FREE RIDER FUTURE VALUE GDP GOVERNMENT SECURITIES GROWTH RATE ILLIQUIDITY INFLATION INSTITUTIONAL STRUCTURE INSURANCE INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES INVESTMENT OPPORTUNITIES LEGISLATION MANDATES MERCHANT BANKS MONETARY POLICY MORAL HAZARD MORAL HAZARD PROBLEMS MUTUAL FUNDS NET ASSETS NET WORTH NOMINAL INTEREST RATES NONBANK FINANCIAL INSTITUTIONS NONPERFORMING LOANS POLICY RESEARCH PORTFOLIOS PRESENT VALUE PRICE STABILITY PRIVATE SECTOR PRIVATIZATION REAL OUTPUT REGULATORY FORBEARANCE RISK TAKING SAVINGS SECURITIES SECURITIES MARKETS SHARP DETERIORATION STATUTORY REQUIREMENTS STOCK PRICES STOCKHOLDERS SUBSIDIARIES THRIFT INSTITUTIONS Mishkin, Frederic S. Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
relation	Policy Research Working Paper;No. 2683
description	The author defines a financial crisis as a disruption in financial markets in which adverse selection and moral hazard problems become much worse, so that financial markets are unable to efficiently channel funds to those who have the most productive investment opportunities. As financial markets become unable to function efficiently, economic activity sharply contracts. Factors that promote financial crises include, mainly, a deterioration in financial sector balance sheets, increases in interest rates and in uncertainty, and deterioration in nonfinancial balance sheets because of changes in asset prices. Financial policies in 12 areas could help make financial crises less likely in emerging market economies, says the author. He discusses: Prudential supervision. Accounting and disclosure requirements. Legal and judicial systems. Market-based discipline. Entry of foreign banks. Capital controls. Reduction of the role of state-owned financial institutions. Restrictions on foreign-dominated debt. The elimination of too-big-to-fail practices in the corporate sector. The proper sequencing of financial liberalization. Monetary policy and price stability. Exchange rate regimes and foreign exchange reserves. If the political will to adopt sound policies in these areas grows in emerging market economies, their financial systems should become healthier, with substantial gains both from greater economic growth and smaller economic fluctuations.
format	Publications & Research :: Policy Research Working Paper
author	Mishkin, Frederic S.
author_facet	Mishkin, Frederic S.
author_sort	Mishkin, Frederic S.
title	Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
title_short	Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
title_full	Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
title_fullStr	Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
title_full_unstemmed	Financial Policies and the Prevention of Financial Crises in Emerging Market Economies
title_sort	financial policies and the prevention of financial crises in emerging market economies
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2001/10/1614834/financial-policies-prevention-financial-crises-emerging-market-economies http://hdl.handle.net/10986/19532
_version_	1764439951571681280

Financial Policies and the Prevention of Financial Crises in Emerging Market Economies

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