Working Paper: NBER ID: w4636
Authors: Frederic S. Mishkin
Abstract: In recent years the possibility of an international financial crisis has increased because of greater liquidity of international financial markets, an increase in corporate indebtedness and the decline of the banking industry. Using an asymmetric information analysis, this paper outlines what signals a central bank might look for to determine if a financial crisis is occurring and then describes how central banks might operate and cooperate to prevent financial crises.
Keywords: financial crises; asymmetric information; central banks; international finance
JEL Codes: E44; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| asymmetric information (D82) | adverse selection (D82) |
| adverse selection (D82) | decrease in lending (G21) |
| asymmetric information (D82) | financial crisis (G01) |
| moral hazard (G52) | defaults (Y60) |
| asymmetric information (D82) | likelihood of financial crisis (G01) |