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Financial Liberalisation in Emerging Markets: How Does Bank Lending Change?
Author(s) -
Hübler Olaf,
Menkhoff Lukas,
Suwanaporn Chodechai
Publication year - 2008
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2007.01067.x
Subject(s) - collateral , liberalization , economics , financial system , international economics , interest rate , business , monetary economics , finance , market economy
Financial liberalisation has often failed in the past due to underestimated problems of structural change. We analyse such changes in lending behaviour of Thai commercial banks during a liberalisation phase by way of unique micro data. Liberalisation has expected positive effects, such as lowering the interest rate spread and collateral requirements. Liberalisation causes structural change, such as a decline in collateral‐based and relationship banking. However, the liberal‐isation evidence is consistent with more risk taking, such as lending to more risky projects and less protection against default. The Thai experience suggests obvious policy lessons.