The same network of business-government relations in Asia that created the moral hazard problem in the first place also weakened the incentives that governments had to develop and enforce effective prudential regulations.

Question

Quizplus · Accepted Answer

The statement is true. The close relationships between business and government in Asia led to a moral hazard problem, where firms engaged in risky behavior with the expectation that the government would bail them out in case of failure. However, these same network of relationships also made it difficult for governments to regulate and monitor financial institutions effectively, as they were reluctant to impose strict regulations on their corporate allies.

The Same Network of Business-Government Relations in Asia That Created