dc.contributor.author | ALLEN, Franklin | |
dc.contributor.author | CARLETTI, Elena | |
dc.contributor.author | GOLDSTEIN, Itay | |
dc.contributor.author | LEONELLO, Agnese | |
dc.date.accessioned | 2016-01-06T14:40:29Z | |
dc.date.available | 2016-01-06T14:40:29Z | |
dc.date.issued | 2015 | |
dc.identifier.issn | 0265-8003 | |
dc.identifier.uri | https://hdl.handle.net/1814/38285 | |
dc.description.abstract | Government guarantees to financial institutions are intended to reduce the likelihood of runs and bank failures, but are also usually associated with distortions in banks’ risk taking decisions. We build a model to analyze these trade-offs based on the global-games literature and its application to bank runs. We derive several results, some of which against common wisdom. First, guarantees reduce the probability of a run, taking as given the amount of bank risk taking, but lead banks to take more risk, which in turn might lead to an increase in the probability of a run. Second, guarantees against fundamental-based failures and panic-based runs may lead to more efficiency than guarantees against panic-based runs alone. Finally, there are cases where following the introduction of guarantees banks take less risk than would be optimal. | en |
dc.format.mimetype | application/pdf | en |
dc.language.iso | en | en |
dc.relation.ispartofseries | CEPR Discussion Paper | en |
dc.relation.ispartofseries | 2015/10560 | en |
dc.relation.uri | http://www.voxeu.org/epubs/cepr-dps/government-guarantees-and-financial-stability | en |
dc.rights | info:eu-repo/semantics/openAccess | en |
dc.title | Government guarantees and financial stability | en |
dc.type | Working Paper | en |