The mismanagement of financial liberalization in emerging market countries can be understood as a severe ________.
A)asymmetric information problem
B)lemons problem
C)principal/agent problem
D)free-rider problem

Question

Quizplus · Accepted Answer

The principal/agent problem arises when one party (the principal) delegates decision-making authority to another party (the agent), but the agent's interests may not align with those of the principal. In the context of financial liberalization in emerging market countries, the government (the principal) may delegate authority to financial institutions (the agents) to manage the liberalization process. However, the financial institutions may have incentives to take excessive risks or engage in other activities that are not in the best interests of the government or the economy as a whole.

The Mismanagement of Financial Liberalization in Emerging Market Countries Can