Moral Hazard and International Crisis Lending: A Test

By Giovanni Dell'Ariccia, I. Schnabel, Jeromin Zettelmeyer. Social Science Research Network, 2002

121 citations recorded by the source corpus.

We test for the existence of a moral hazard effect attributable to official crisis lending by analyzing the evolution of sovereign bond spreads in emerging markets before and after the Russian crisis. The nonbailout of Russia in August 1998 is interpreted as an event that decreased the perceived probability of future crisis lending to emerging markets. In the presence of moral hazard, such an event should raise not only the level of spreads, but also the sensitivity with which spreads reflect fundamentals as well as their cross-country dispersion. We find strong evidence for all three effects.

Subfields: Economics and Econometrics, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/b115c9a5eee7394eb6aae839374a884f577a8f32

Citations in the corpus

• THE IMF: A BIRD'S EYE VIEW OF ITS ROLE AND OPERATIONS (2007, unknown): “Thus, while some find evidence that could be consistent with creditor moral hazard – albeit with other things as well – (Eichengreen and Mody, 2000; Dell’ Ariccia et al, 2002; Haldane and Scheibe, 2004; Hayo and Kutan, 2005), others do not, or they remain unconvinced by the evidence they examine…”