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<p>There are various sources of moral hazard in IPE. In this paper, I contribute by
examining whether bilateral swap agreements (BSAs) cause moral hazard in central banks
and the private sector. Using an original dataset on BSAs signed by all countries
from 2008 to 2020 and incorporating social network analysis, I find that BSAs lead
to lower reserves-to-GDP ratios in central banks on the periphery of the BSA network,
while the private banking sectors behave more cautiously to make up for this increased
risk. This study answers the long-debated question of whether BSAs cause moral hazard
and is in line with studies that find moral hazard in the IMF and other forms of financial
cooperation. Policymakers in the creditor states, the IMF, and states protected by
BSAs should be aware of the adverse effects of BSAs. Additionally, I find some suggestive
evidence that states on the periphery of the BSA network may be more likely to have
currency crises, while less likely to have banking crises. Finally, this study highlights
an important source of moral hazard in IPE, and more broadly, in international cooperation:
besides asymmetric dyadic relations, states’ latent roles in the full interaction
network may shape their different roles and cause moral hazard. Hierarchical structures
can induce moral hazard even when interactions are symmetric. </p>
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