Uncertainty as Commitment
Jaromir Nosal, Guillermo Ordoñez
Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate endogenous crises when the government cannot commit. However, at the outbreak of financial problems, usually the government is uncertain about their nature, and hence it may delay intervention to learn more about them. We show that intervention delay leads to strategic restraint banks endogenously restrict the riskiness of their portfolio relative to their peers in order to avoid being the worst performers and bearing the cost of such delay. These novel forces help to avoid endogenous crises even when the government cannot commit. We analyze the effect of government policies from the perspective of this new result
Year of publication: |
February 2013
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Authors: | Nosal, Jaromir |
Other Persons: | Ordoñez, Guillermo (contributor) |
Institutions: | National Bureau of Economic Research (contributor) |
Publisher: |
Cambridge, Mass : National Bureau of Economic Research |
Subject: | Theorie | Theory | Entscheidung unter Unsicherheit | Decision under uncertainty | Risikopräferenz | Risk attitude | Unvollkommene Information | Incomplete information | Bankenliquidität | Bank liquidity | Bankenregulierung | Bank regulation | Finanzkrise | Financial crisis | Schuldenübernahme | Bailout | Risiko | Risk |
Saved in:
freely available
Extent: | 1 Online-Ressource |
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Series: | NBER working paper series ; no. w18766 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Mode of access: World Wide Web System requirements: Adobe [Acrobat] Reader required for PDF files Hardcopy version available to institutional subscribers. |
Other identifiers: | 10.3386/w18766 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012459895