 Jose Chicoma, Edgardo Demaestri, Maria Pia Iannariello, Pietro Masci Market Discipline and Financial Crises IDB - june 2002
Market Discipline and Financial Crises
An Analysis of Stock Prices in Japan, Argentina, Chile and Mexico
Many countries, both developed and emerging, have experienced banking and currency crises in recent years.
These episodes have been extremely costly posing a substantial burden on individual countries and the global economy.
Given the detrimental effects of these crises, a lot has been written in order to learn more about their causes, channels of contagion, indicators of early warnings of distress and the role of supervision or lack thereof, among others.
One of the topics that remains relatively unexplored however, is the role of "market discipline" in the context of banking crisis.
Particularly, if “market discipline” exists and if it has functioned before, during, and after crisis episodes to shape the behavior of market participants.
The studies that focus on this issue mostly concentrate on the behavior of depositors in banking systems under distress.
This paper will add to the current literature by analyzing the behavior of stockholders in the banking system instead of that of depositors.
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(06/01/2002)
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