Financial Crisis Resolution

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dc.contributor.author SCHROTH, Josef
dc.date.accessioned 2012-07-18T10:17:41Z
dc.date.available 2012-07-18T10:17:41Z
dc.date.issued 2012
dc.identifier.issn 1830-7728
dc.identifier.uri http://hdl.handle.net/1814/22796
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.language.iso en en
dc.relation.ispartofseries EUI MWP en
dc.relation.ispartofseries 2012/14 en
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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