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Ethical Foundations of Financial Regulation

Kane, Edward J. - 2008

Regulation consists of rulemaking and enforcement. Economic theory offers two complementary rationales for regulating … and efficiency across society as a whole. Agency-cost theory recognizes that incentive conflicts and coordination problems … arise in multi- party relationships and that regulation introduces opportunities to impose rules that enhance the welfare of …

Persistent link: https://www.econbiz.de/10012774887

Regulation and Supervision : An Ethical Perspective

Kane, Edward J. - 2008

This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

Persistent link: https://www.econbiz.de/10012772313

Preventing Financial Crises : An International Perspective

Mishkin, Frederic S. - 2010

In recent years the possibility of an international financial crisis has increased because of greater liquidity of international financial markets, an increase in corporate indebtedness and the decline of the banking industry. Using an asymmetric information analysis, this paper outlines what...

Persistent link: https://www.econbiz.de/10012763471

Liquidity Risk, Liquidity Creation and Financial Fragility : A Theory of Banking

Diamond, Douglas W. - 2010

Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they are uncertain about their ability to continue to...

Persistent link: https://www.econbiz.de/10012763345

The Lessons from the Banking Panics in the United States in the 1930s for the Financial Crisis of 2007-2008

Bordo, Michael D. - 2011

In this paper we revisit the debate over the role of the banking panics in 1930-33 in precipitating the Great Contraction. The issue hinges over whether the panics were illiquidity shocks and hence in support of Friedman and Schwartz (1963) greatly exacerbated the recession which had begun in...

Persistent link: https://www.econbiz.de/10013132917

Macroprudential Regulation Versus Mopping Up after the Crash

Jeanne, Olivier - 2013

macroprudential tax revenue in a bailout fund used for stimulus measures is undesirable …

Persistent link: https://www.econbiz.de/10013089016

Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts

Farhi, Emmanuel - 2009

policy is non-targeted. The ex post benefits from a monetary bailout accrue in proportion to the number amount of leverage … role for macro-prudential supervision. We characterize the optimal regulation, which takes the form of a minimum liquidity … bailout instruments is endogenous and characterize the structure of optimal bailouts …

Persistent link: https://www.econbiz.de/10013158032

Optimal Policy for Macro-Financial Stability

Benigno, Gianluca - 2019

There is a new and now extensive literature analyzing government policies for financial stability based on models with endogenous borrowing constraints. These normative analyses often build upon the concept of constrained efficient allocation, where the social planner is constrained by the same...

Persistent link: https://www.econbiz.de/10012860452

Efficient Bailouts?

Bianchi, Javier - 2012

We develop a quantitative equilibrium model of financial crises to assess the interaction between ex-post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the severity of the recession. Ex ante, the...

Persistent link: https://www.econbiz.de/10013096860

Debt Fragility and Bailouts

Cooper, Russell - 2012

This paper studies debt fragility and the sharing of the resulting strategic uncertainty through ex post bailouts. Default arises in equilibrium because of both fundamental shocks and beliefs. The probability of default depends on borrowing rates and, in equilibrium, on the beliefs of lenders...

Persistent link: https://www.econbiz.de/10013100683

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