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Gambling for resurrection in Iceland: the rise and fall of the banks

Baldursson, Fridrik Mar; Portes, Richard - C.E.P.R. Discussion Papers - 2013

liquidity until their collapse. An official report (SIC, 2010) has, however, exposed severe weaknesses in the banks’ assets and … borrowers, while they should have been deleveraging and securing their liquidity positions in foreign currency. The banks also … before the collapse of October 2008 the banks all reported strong liquidity positions. These reports were misleading, but we …

Persistent link: https://www.econbiz.de/10011084274

Dollarization, Bailouts and the Stability of the Banking System

Gale, Douglas M; Vives, Xavier - C.E.P.R. Discussion Papers - 2001

Central bank policy suffers from time-inconsistency when facing a banking crisis: A bailout is optimal ex post but ex ante it should be limited to control moral hazard. Dollarization provides a credible commitment not to help at the cost of not helping even when it would be ex ante optimal to do...

Persistent link: https://www.econbiz.de/10005788955

The Consistency of Optimal Policy in Stochastic Rational Expectations Models

Backus, David; Driffill, John - C.E.P.R. Discussion Papers - 1986

This paper extends the work of Barro and Gordon (1983) to general linear models with rational expectations. We examine the question whether the optimal policy rule, i.e. the one that a government which could pre-commit itself would use, can be sustained as a consistent rule in the sense defined...

Persistent link: https://www.econbiz.de/10005504552

Public Policy Towards R&D in Oligopolistic Industries

Leahy, Dermot; Neary, J Peter - C.E.P.R. Discussion Papers - 1995

This paper examines the free-market and socially-optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other, but lower when they cooperate on R&D (at least with high spillovers) and when they...

Persistent link: https://www.econbiz.de/10005789170

When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games

Mailath, George J.; Nocke, Volker; White, Lucy - C.E.P.R. Discussion Papers - 2004

In repeated normal-form games, simple penal codes (Abreu 1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. We provide two examples illustrating that a subgame-perfect outcome...

Persistent link: https://www.econbiz.de/10005124002

Multinational Bank Regulation with Deposit Insurance and Diversification Effects

Lóránth, Gyöngyi; Morrison, Alan - C.E.P.R. Discussion Papers - 2003

We analyse a model in which bank deposits are insured and there is an exogenous cost of bank capital. The former effect results in bank over-investment and the latter in under-investment. Regulatory capital requirements introduce investment distortions, which are a constrained optimal response...

Persistent link: https://www.econbiz.de/10005504747

Market-Based Bank Capital Regulation

Bulow, Jeremy I.; Klemperer, Paul - C.E.P.R. Discussion Papers - 2013

Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii) systemically important institutions cannot collapse...

Persistent link: https://www.econbiz.de/10011083692

The Macroeconomics of Money Market Freezes

Bruche, Max; Suarez, Javier - C.E.P.R. Discussion Papers - 2009

This paper develops a tractable general equilibrium model in which money markets provide structural funding to some banks. When bank default risk becomes significant, retail deposit insurance creates an asymmetry between banks that operate in savings-rich regions, which can remain financed at...

Persistent link: https://www.econbiz.de/10004991546

Market Discipline and Financial Safety Net Design

Demirguc-Kunt, Asli; Huizinga, Harry - C.E.P.R. Discussion Papers - 1999

An important question is whether the financial safety net reduces market discipline on bank risk taking. For countries with varying deposit insurance schemes, we find that deposit rates continue to reflect bank riskiness. Cross-country evidence suggests that explicit deposit insurance reduces...

Persistent link: https://www.econbiz.de/10005661598

Deposit Insurance and International Bank Deposits

Huizinga, Harry; Nicodème, Gaëtan - C.E.P.R. Discussion Papers - 2003

This Paper examines how international depositors respond to national deposit insurance policies. Countries with explicit deposit insurance are found to be relatively attractive to international non-bank depositors. Schemes characterized by co-insurance, a private administration, and a low...

Persistent link: https://www.econbiz.de/10005662335