Title Financial globalization and the governance of domestic financial intermediaries / prepared by Thierry Tressel and Thierry Verdier

Published Washington, D.C. : International Monetary Fund, ©2007

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Description 1 online resource (57 pages) : illustrations Series IMF working paper ; WP/07/47. Contents I. Introduction; II. Literature Review; III. Structure of the Model; A. Production Technology; B. Financial Intermediaries; C. Uninformed Investors; D. Collusion; IV. Firms' Financial Contracts; A. Incentive and Participation Constraints; B. The Borrower's Maximization Program; C. Project Size; D. When Does Partial Collusion Occur?; V. General Equilibrium; A. Occupational Choices and Equilibrium on the Markets for Domestic Capital; B. Existence of a Mixed Equilibrium; Figures; 1. Equilibrium Rate of Return on Informed Capital VI. Liberalization of International Portfolio Investment and Bank Borrowing2. Equilibrium Size of Informed Capital; VII. The Impact of Foreign Direct Investment; A. Foreign Direct Investment in the Corporate Sector; 3. Impact of Capital Flows on Investment, Productivity and Output; 4a. Impact of FDI on the Cost of Bank Capital; B. Foreign Investment in the Banking Sector; 4b. Impact of FDI on Output; 5a. Foreign Bank Entry (High Costs of Collusion); 5b. Foreign Bank Entry (Low Costs of Collusion); VIII. The Destabilizing Effect of Systemic Bailout Guarantees 6. Foreign Bank Entry with Heterogenous FirmsIX. Conclusion; 7. The Impact of Bailout Guarantees; Appendix; References Summary We model an economy in which domestic banks and firms face incentive constraints, as in Holmstrom and Tirole (1997). Firms borrow from banks and uninformed investors, and can collude with banks to reduce the intensity of monitoring. We study the general equilibrium effects of capital flows (portfolio investments and loans, FDI) on the governance of domestic banks. We find that liberalization of capital flows may deteriorate the governance of the domestic financial system by increasing firms' incentives to collude with banks, with negative effects on productivity. We also show that systemic bailout guarantees increase the risks of collusion Notes "March 2007." At head of title: Research Department Bibliography Includes bibliographical references (pages 54-57) Notes Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL English digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL Print version record Subject Banks and banking -- State supervision -- Econometric models Capital movements -- Econometric models Bank failures -- Econometric models Globalization -- Econometric models Banks and banking. Finance. finance. banks (institutions) Finance Banks and banking Bank failures -- Econometric models Capital movements -- Econometric models Form Electronic book Author Verdier, Thierry International Monetary Fund. Research Department. ISBN 1282391992 9781282391994 9781451910643 1451910649 1462357857 9781462357857 1452776369 9781452776361 9786613820426 6613820423

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