Preventing Financial Crises: An International Perspective

In recent years the possibility of an international fmancial crisis has increased because of greater liquidity of international fmancial 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.