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dc.contributor.authorALLEN, Franklin
dc.contributor.authorCARLETTI, Elena
dc.contributor.authorGOLDSTEIN, Itay
dc.contributor.authorLEONELLO, Agnese
dc.date.accessioned2016-01-06T14:40:29Z
dc.date.available2016-01-06T14:40:29Z
dc.date.issued2015
dc.identifier.issn0265-8003
dc.identifier.urihttps://hdl.handle.net/1814/38285
dc.description.abstractGovernment 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.mimetypeapplication/pdfen
dc.language.isoenen
dc.relation.ispartofseriesCEPR Discussion Paperen
dc.relation.ispartofseries2015/10560en
dc.relation.urihttp://www.voxeu.org/epubs/cepr-dps/government-guarantees-and-financial-stabilityen
dc.rightsinfo:eu-repo/semantics/openAccessen
dc.titleGovernment guarantees and financial stabilityen
dc.typeWorking Paperen


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