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enhance welfare. The paper offers a new theory to explain why stress tests are generally welfare enhancing. We also offer a …
Persistent link: https://www.econbiz.de/10009674818
This paper proposes a theory of shadow bank runs in the presence of sponsor liquidity support. We show that liquidity …
Persistent link: https://www.econbiz.de/10011855308
We analyze disclosure of multiple pieces of information by a bank supervisor to a continuum of investors. Specifically, we present a model to explain why a banking authority, observing the state of the banking system, is willing to commit to perform stress tests, and disclose their results....
Persistent link: https://www.econbiz.de/10013110540
We develop an operational model of information contagion and show how it may be integrated into a mainstream, top-down, stress-testing framework to quantify systemic risk. The key transmission mechanism is a two-way interaction between the beliefs of secondary market investors and the...
Persistent link: https://www.econbiz.de/10011520642
enhance welfare. The paper offers a new theory to explain why stress tests are generally welfare enhancing. We also offer a …
Persistent link: https://www.econbiz.de/10012988806
overdue. This paper aims to assess the existing structures of financial supervision using game theory concepts. The paper … develops a game theory matrix describing how two regulators working in the same field are expected to interact with each other …, from one financial supervisory structure to the other. The paper concludes with an application in Public Choice theory …
Persistent link: https://www.econbiz.de/10013037183
This paper argues that stress tests encompassing the entire banking sector (macro stress tests) can be designed to improve welfare. We develop a multi-receiver framework of Bayesian persuasion to show that a banking supervisor can create value when he commits to disclose the stress-testing...
Persistent link: https://www.econbiz.de/10010339955
We analyze the strategic interaction between undercapitalized banks and a supervisor who may intervene by preventive recapitalization. Supervisory forbearance emerges because political and fiscal costs undermine supervisors' commitment to intervene. When supervisors have lower credibility,...
Persistent link: https://www.econbiz.de/10012301221
We analyze the strategic interaction between undercapitalized banks and a supervisor who may intervene by preventive recapitalization. Supervisory forbearance emerges because of a commitment problem, reinforced by fiscal costs and constrained capacity. Private incentives to comply are lower when...
Persistent link: https://www.econbiz.de/10012007801
This paper develops a model where large financial intermediaries subject to systemic runs internalize the effect of their leverage on aggregate risk, returns and asset prices. Near the steady-state, they restrict leverage to avoid the risk of a run which gives rise to an accelerator effect. For...
Persistent link: https://www.econbiz.de/10012604798