As the recent financial crisis started unfolding, governments intervened through substantive subsidies and other benefits towards financial institutions to avoid their collapse. In addition, various stimulus packages were endorsed to rescue various sectors of the economy, including the financial...

I develop a theoretical model for investigating the cost of failure to commit in the provision of bailouts to financial institutions. When a financial institution fails, the fiscal authority often deviates from its ex ante no-bailout commitment: the ex post best response is to bail out. The...

I develop a theoretical model for investigating the cost of failure to commit in the provision of bailouts to financial institutions. When a financial institution fails, the fiscal authority often deviates from its ex ante no-bailout commitment: the ex post best response is to bail out. The...

This review develops a theoretical framework that highlights the principles governing economically meaningful estimates of the cost of bailouts. Drawing selectively on existing cost estimates and augmenting them with new calculations consistent with this framework, I conclude that the total...