that help address questions such as the slope of bond demand functions and the efficacy of central bank liquidity programs …

bank suffering from liquidity shocks, we find that the unregulated bank keeps too much liquidity and monitors too little. A … central bank can alleviate the liquidity problem, but induces moral hazard. Therefore, we introduce an additional authority … that is able to bail out the bank either by injecting capital at a fixed return or by receiving an equity claim. This …

asymmetric information and no excess profits. It captures the possibility of bank runs and business cycle risk; but it ignores …

, the latter being consistent with an effect of the quality of sovereign guarantees on bank credit risk. …We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy … two-way feedback between financial and sovereign credit risk using data on the credit default swaps (CDS) of the Eurozone …

Tripartite financial stability arrangement between the Treasury the Bank of England and the FSA, weaknesses in the Bank of …

) assets are bank-specific. We show that when the outside options of needy banks are weak, surplus banks may strategically … under-provide lending, thereby inducing inefficient sales of bank-specific assets. A central bank can ameliorate this …

guarantees, and provision of unrestricted liquidity support. In the context of a simple model of information-based bank runs … any of these policies leads to a reduction in the interest rate of uninsured deposits and in the bank’s incentives to take …