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Caught between Scylla and Charybdis? Regulating bank leverage when there is rent seeking and risk shifting

Acharya, Viral V.; Mehran, Hamid; Thakor, Anjan - 2010

risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised …

Persistent link: https://www.econbiz.de/10010287043

Crises and bail-outs of banks and countries: Interconnections, analogies, differences

DeBonis, Riccardo; Giustiniani, Alessandro; Gomel, Giorgio - 1998

During the last decade or so a number of banking crises has occurred in both industrial and developing countries. Bank unsoundness is the focus of deep concerns for its possible interactions with macroeconomic instability. The potential size and severity of sovereign debt crises in integrated...

Persistent link: https://www.econbiz.de/10011608408

Counterparty Risk in Insurance Contracts: Should the Insured Worry about the Insurer?

Thompson, James R. - 2007

We analyze the effect of counterparty risk on insurance contracts using the case of credit risk transfer in banking. In … the insurer can create an incentive for the insuree to reveal superior information about the risk of their "investment … problem and may not decrease counterparty risk. Our research suggests that regulators should be wary of risk being offloaded …

Persistent link: https://www.econbiz.de/10011940750

Liquidity Risk and Monetary Policy

Sauer, Stephan - 2007

This paper provides a framework to analyse emergency liquidity assistance of central banks on financial markets in response to aggregate and idiosyncratic liquidity shocks. The model combines the microeconomic view of liquidity as the ability to sell assets quickly and at low costs and the...

Persistent link: https://www.econbiz.de/10010427492

On the desirability of taxing capital income to reduce moral hazard in social insurance

Jacobs, Bas; Schindler, Dirk - 2009

more attractive for social insurance if a larger part of risk is realized in the first period of the life-cycle. Our …

Persistent link: https://www.econbiz.de/10010266030

A Model of the IMF as a Coinsurance Arrangement

Shim, Ilhyock; Sharma, Sunil; Chami, Ralph - In: Economics: The Open-Access, Open-Assessment E-Journal 2 (2008) 2008-14, pp. 1-41

The paper shows that an IMF-like coinsurance arrangement among countries can play a useful role in the global financial system. The operation of the coinsurance arrangement is examined under different loan contracts. It shows that, if the IMF?s objective is to safeguard its resources and be...

Persistent link: https://www.econbiz.de/10010295311

A "wreckers theory" of financial distress

von Kalckreuth, Ulf - 2005

In recent years, a number of papers have established a new empirical regularity. Stocks of distressed firms vastly underperform those of financially healthy firms. It is not necessary to attribute the negative excess returns of distressed firms to inefficient or irrational markets. We show that...

Persistent link: https://www.econbiz.de/10010295785

Division of Labour and Directed Production

Ratto, Marisa; Schnedler, Wendelin - 2005

We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We...

Persistent link: https://www.econbiz.de/10011422133

You Don't Always Get What You Pay For

Schnedler, Wendelin - 2007

Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...

Persistent link: https://www.econbiz.de/10011422168

Too Few Cooks Spoil the Broth: Division of Labour and Directed Production

Ratto, Marisa; Schnedler, Wendelin - 2008

How can a manager influence workers' activity while knowing little about it? This paper examines a situation where production requires several tasks, and the manager wants to direct production to achieve a preferred allocation of effort across tasks. However, the effort that is required for each...

Persistent link: https://www.econbiz.de/10011422178

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