Financial Crisis Resolution

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Show simple item record SCHROTH, Josef 2012-07-18T10:17:41Z 2012-07-18T10:17:41Z 2012
dc.identifier.issn 1830-7728
dc.description.abstract This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crises. A pecuniary externality entails that bank back-loading of dividend payments may weaken bank incentives. Banks’ strong desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis. I show that a constrained social planner finds it beneficial to introduce a permanent wedge between the deposit rate and the economy’s marginal rate of transformation. The wedge improves borrowers’ access to finance during a financial crisis by strengthening banks’ incentives to provide intermediation services. I propose a simple implementation of the constrained-efficient allocation that limits bank size. en
dc.format.mimetype application/pdf
dc.language.iso en en
dc.relation.ispartofseries EUI MWP en
dc.relation.ispartofseries 2012/14 en
dc.rights info:eu-repo/semantics/openAccess
dc.subject Limited commitment en
dc.subject constrained efficiency en
dc.subject financial regulation en
dc.subject financial crises en
dc.subject E20 en
dc.subject E51 en
dc.subject G10 en
dc.subject G18 en
dc.title Financial Crisis Resolution en
dc.type Working Paper en
dc.neeo.contributor SCHROTH|Josef|aut|
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