Financial sector inefficiencies and coordination failures
Subtitle: implication for crisis management
By: Pierre-Richard Agénor, Joshua Aizenman.
Contributors: Aizenman, Joshua.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 7446; Working paper series (National Bureau of Economic Research) -- working paper no. 7446.
Publisher: National Bureau of Economic Research
Published: 1999
Place of publication: Cambridge, MA
Language: eng
Number of pages: 20
Subjects: Intermediation (Finance) -- East Asia.; Financial crises -- East Asia.; Debt -- East Asia.; Debt relief -- East Asia.; Bank loans -- Law and legislation.; Banks and banking -- State supervision.
Description: "This paper analyzes the implication of inefficient financial intermediation for crisis management in a country where firms are highly-indebted. The analysis is based on a model in which firms rely on bank credit to finance their working capital needs and lenders face high state verification and enforcement costs of loan contracts. The analysis shows that higher contract enforcement and verification costs, lower expected productivity, or higher volatility, may shift the economy to the wrong side of the debt Laffer curve, with potentially sizable employment and output losses. The main implication of this analysis for the current policy debate on crisis management is [i.e. in?] East Asia is that dept [i.e. debt] reduction, in addition to debt rescheduling, may be required as part of the process of reducing financial sector inefficiences" -- abstract.
Notes: "December 1999."

JEL no. E44, F36, I31.

Includes bibliographical references (p. 19-20).

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