Moral hazard framework reveals root cause of Asian crisis severity.
The Asian crisis of 1997-98 may have been partly caused by moral hazard issues. By creating a framework that looks at how costs are shifted between different moral hazard relationships, researchers found that moral hazard can lead to more risk-taking and higher costs. When looking at Indonesia, Korea, and Thailand, the data supported this idea. However, measuring moral hazard is tricky, so more research is needed to be sure.