Reduced credit supply in the years 2008 and 2009 should have resulted in lower growth in industries that are more dependent on external finance. This effect should have been stronger in countries with a more prominent and/or more leveraged financial system. We focus on the OECD countries and,...

The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks' remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank's top executives, and why...

In CPB Discussion Paper 209 we study incentives of financial intermediaries to reserve liquidity given that they can rely on the interbank market for their liquidity needs. Intermediaries can partially pledge their assets to each other, but not to the rest of the economy. Therefore liquidity...

type="main" <p>We study optimal risk adjustment in imperfectly competitive health insurance markets when high-risk consumers are less likely to switch insurer than low-risk consumers. Insurers then have an incentive to select even if risk adjustment perfectly corrects for cost differences. To...</p>

We study how the possibility of renegotiation affects optimal bail-out policies for countries under asymmetric information on a country's cost of reforms. To that end, we solve the Bellman equation describing the optimal bail-out mechanism in a multiple-period principal-agent model with adverse...

We analyse downstream access and capacity choice in the market for wireless telecommunications, where spectrum rights are owned by vertically integrated duopolists and may be traded. In the market for wireless telecommunications, radio spectrum is an essential input. Prior to network...

We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains...

Whenever you phone your mother, switch on the light, or buy health insurance you purchase a service or product from a chain of vertically related industries. Providers of these products or services need access to a telecommunications network, an electricity network or to health care...

We explore whether a Financial Transactions Tax (FTT) is likely to correct the market failures that have contributed to the financial crisis, to what extent FTT succeeds in raising revenues, and how the FTT compares to alternative taxes in terms of efficiency. We find little evidence that the...