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Creditor moral hazard during the EMU debt crisis

Author

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  • Bratis, Theodoros
  • Laopodis, Nikiforos T.
  • Kouretas, Georgios P.
Abstract
A recent line of research deals with the formulation, the justification and the modelling of a crisis triggered by involved economic agents. Modelling financial crises within an asymmetric information environment is argued to be a difficult task since the measurement of adverse selection and/or moral hazard during a financial/debt crisis is difficult. The present paper focuses on the study of moral hazard within a macroeconomic framework in the context of international lending during a financial/debt crisis. Specifically, we analyse the creditor moral hazard effect due to the international financial support to Greece during the current sovereign debt crisis in the Eurozone. We develop a novel testing procedure to evaluate the hypothesis of creditor moral hazard in a monetary union using data for Ireland and Portugal, two countries which received financial aid packages over the period 2009–2013 with Greece taken as the control country. The main results of our study shed light on the creditor moral hazard issue raised by the provision of multi-source international lending schemes which have been implemented to counteract the European debt crisis.

Suggested Citation

  • Bratis, Theodoros & Laopodis, Nikiforos T. & Kouretas, Georgios P., 2015. "Creditor moral hazard during the EMU debt crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 39(C), pages 122-135.
    • Handle: RePEc:eee:intfin:v:39:y:2015:i:c:p:122-135
    DOI: 10.1016/j.intfin.2015.07.001
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    Cited by:

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    2. Kutan, Ali M. & Muradoğlu, Yaz G., 2016. "Financial and real sector returns, IMF-related news, and the Asian crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 28-37.
    3. Hazar Altınbaş & Vincenzo Pacelli & Edgardo Sica, 2022. "An Empirical Assessment of the Contagion Determinants in the Euro Area in a Period of Sovereign Debt Risk," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(2), pages 339-371, July.
    4. Ali M. Kutan & Yaz Gülnür Muradoğlu & Zhong Yu, 2016. "Worldwide impact of IMF policies during the Asian crisis: who does the IMF help, creditors or crisis countries?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(2), pages 116-147, June.
    5. Mirdala, Rajmund & Ruščáková, Anna, 2015. "On Origins and Implications of the Sovereign Debt Crisis in the Euro Area," MPRA Paper 68859, University Library of Munich, Germany.
    6. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    7. Hazar Altinbas & Vincenzo Pacelli & Edgardo Sica, 2018. "The Determinants of Sovereign Bond Yields in the EMU: New Empirical Evidence," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 41-56, May.

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    More about this item

    Keywords

    Creditor moral hazard; Sovereign debt crisis; International lending;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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