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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
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
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
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
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
guarantees, and provision of unrestricted liquidity support. In the context of a simple model of information-based bank runs …
Persistent link: https://www.econbiz.de/10005791329
capital requirement and chooses the liquidity buffer that it wants to hold and the risk of its loan portfolio. The equilibrium …. Moreover, when the LLR does not charge penalty rates, the bank chooses the same level of risk and a smaller liquidity buffer …
Persistent link: https://www.econbiz.de/10005791539
This Paper investigates the determinants of the takeover of a foreign bank by a domestic bank whereby the former becomes a branch of the latter. Each bank is initially supervised by a national agency that cares about closure costs and deposit insurance payouts, and may decide the early closure...
Persistent link: https://www.econbiz.de/10005792374
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
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