: they improve the credibility of the regulator's no-bailout threat for large shocks and they reduce free-riding incentives …

Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate …

New security designs, improvements in computer telecommunications technology and advances in the theory of finance have …

We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy …-financial sector to fund the bailout may be inefficient since it weakens its incentive to invest, decreasing growth. Instead, the … sovereign may choose to fund the bailout by diluting existing government bondholders, resulting in a deterioration of the …

bailouts are costly because they worsen incentives and thereby reduce welfare. We show that regulation in the form of limits on … undertake bailouts. In terms of the cyclical properties of regulation, we show that regulation should be tightest in aggregate …

allows banks in different regions to smooth local liquidity shocks by borrowing and lending on a world interbank market. We … improving from an ex ante point of view. We also look at the model's implications for financial regulation and show that, in a … second-best world, financial integration can increase the welfare benefits of liquidity requirements …