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Lender of Last Resort and Bank Closure Policy

Freixas, Xavier; Parigi, Bruno Maria - CESifo - 2008

During the last decades a consensus has emerged that it is impossible to disentangle liquidity shocks from solvency shocks. As a consequence the classical lender of last resort rules, as defined by Thornton and Bagehot, based on lending to solvent illiquid institutions appear ill-suited to this...

Persistent link: https://www.econbiz.de/10005405802

Banking Supervision in Integrated Financial Markets: Implications for the EU

Stolz, Stéphanie - CESifo - 2002

I analyze the optimal design of banking supervision in the presence of cross-border lending. Cross-border lending could imply that an individual bank failure in one country could trigger negative spillover effects in another country. Such cross-border contagion effects could turn out to be...

Persistent link: https://www.econbiz.de/10005416491

Complex Financial Networks and Systemic Risk: A Review

Bougheas, Spiros; Kirman, Alan P. - CESifo - 2014

review is on studies that use network analysis paying special attention to those that apply complex analysis techniques …

Persistent link: https://www.econbiz.de/10010764284

Bank Networks: Contagion, Systemic Risk and Prudential Policy

Aldasoro, Inaki; Gatti, Domenico Delli; Faia, Ester - CESifo - 2015

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest … sale externalities. The resulting network configurations exhibits a core-periphery structure, dis-assortative behavior and … low clustering coefficient. We measure systemic importance by means of network centrality and input-output metrics and the …

Persistent link: https://www.econbiz.de/10011155379

The Economics of Insurance, its Borders with Finance and Implications for Systemic Regulation

Thimann, Christian - CESifo - 2015

Global financial regulators are currently reflecting on the nature of the insurance business. Specifically, they are trying to classify insurance into ‘traditional’ and ‘non-traditional’ activities, and to distinguish them from ‘non-insurance’ activities. Subsequently, they will seek...

Persistent link: https://www.econbiz.de/10011165510

Contagion in Financial Networks: A Threat Index

Demange, Gabrielle - CESifo - 2015

Interbank claims are a concern to regulators as they might facilitate the dissemination of defaults and generate spill-over effects. Building on a simple model, this paper introduces a measure of the spill-over effects that a bank generates when it defaults. The measure is based on an explicit...

Persistent link: https://www.econbiz.de/10011257674

Credit Market Competition and Liquidity Crises

Carletti, Elena; Leonello, Agnese - CESifo - 2014

We develop a model where banks invest in reserves and loans, and face aggregate liquidity shocks. Banks with liquidity shortage sell loans on the interbank market. Two equilibria emerge. In the no default equilibrium, all banks hold enough reserves and remain solvent. In the mixed equilibrium,...

Persistent link: https://www.econbiz.de/10010743450

Credit Derivatives and the Default Risk of Large Complex Financial Institutions

Calice, Giovanni; Ioannidis, Christos; Williams, Julian - CESifo - 2011

This paper addresses the impact of developments in the credit risk transfer market on the viability of a group of systemically important financial institutions. We propose a bank default risk model, in the vein of the classic Merton-type, which utilizes a multi-equation framework to model...

Persistent link: https://www.econbiz.de/10009323299

On the Incidence of a Financial Transactions Tax in a Model with Fire Sales

Bierbrauer, Felix - CESifo - 2012

This paper studies the impact of a financial transactions tax on a financial market where financial institutions trade with each other. Assets are marked to the market and financial institutions with negative equity are forced out of business. There are two main results: First, if all banks have...

Persistent link: https://www.econbiz.de/10010556078

A New Two-Pillar Strategy for the ECB

Grauwe, Paul De; Gros, Daniel - CESifo - 2009

The ECB has been arguing in the past that since there is no trade-off between price stability and financial stability, the pursuit of price stability is the best a central bank can do to also maintain financial stability. We argue that there is a potential trade-off between price stability and...

Persistent link: https://www.econbiz.de/10008596592