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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/10012460074

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/10012460282

A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk

Acharya, Viral V. - 2011

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 …

Persistent link: https://www.econbiz.de/10012461522

International Lending of Last Resort and Moral Hazard : A Model of IMF's Catalytic Finance

Corsetti, Giancarlo - 2003

It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...

Persistent link: https://www.econbiz.de/10012468569

Kicking the Can Down the Road : Government Interventions in the European Banking Sector

Acharya, Viral V. - 2020

an econometric approach that addresses the endogeneity associated with governmental bailout decisions in identifying …

Persistent link: https://www.econbiz.de/10012481392

Bank sovereign bond holdings, sovereign shock spillovers, and moral hazard during the European crisis

Beltratti, Andrea - 2015

From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on sovereign CDS of peripheral (GIIPS) countries is negative. We use days with tail sovereign CDS returns of peripheral countries to identify the effects of shocks to the cost of...

Persistent link: https://www.econbiz.de/10012457516

The Economics of Sovereign Debt, Bailouts and the Eurozone Crisis

Gourinchas, Pierre-Olivier - 2020

Despite a formal 'no-bailout clause', we estimate significant net present value transfers from the European Union to … differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic … 'Northern view' (transfers weaken fiscal discipline). While a stronger no-bailout commitment reduces risk-shifting, it may not …

Persistent link: https://www.econbiz.de/10012481598

Fiscal Rules, Bailouts, and Reputation in Federal Governments

Dovis, Alessandro - 2017

Expectations of bailouts by central governments incentivize overborrowing by local governments. In this paper, we ask if fiscal rules can correct these incentives to overborrow when central governments cannot commit and if these rules will arise in equilibrium. We address these questions in a...

Persistent link: https://www.econbiz.de/10012453772

Can the Central Bank Alleviate Fiscal Burdens?

Reis, Ricardo - 2016

Central banks affect the resources available to fiscal authorities through the impact of their policies on the public debt, as well as through their income, their mix of assets, their liabilities, and their own solvency. This paper inspects the ability of the central bank to alleviate the fiscal...

Persistent link: https://www.econbiz.de/10012455666

Individual Versus Aggregate Collateral Constraints and the Overborrowing Syndrome

Uribe, Martín - 2006

This paper compares the equilibrium dynamics of an economy facing an aggregate collateral constraint on external debt to the dynamics of an economy facing a collateral constraint imposed at the level of each individual agent. The aggregate collateral constraint is intended to capture an...

Persistent link: https://www.econbiz.de/10012466408

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