Deposit Insurance and Orderly Liquidation without Commitment: Can we Sleep Well?
AbstractThis paper studies the provision of deposit insurance along with liquidation decisions without commitment in an economy with heterogenous households. The analysis considers both the control of the balance sheet of a failing bank and the ex post provision of deposit insurance. Redistribution plays a key role in these decisions. When households are identical, deposit insurance will be provided ex post to reap insurance gains. But deposit insurance will not be provided ex post if it requires a (socially) undesirable redistribution of consumption which outweighs insurance gains. Partial deposit insurance may though have value. Heterogeneity across households also impacts the optimal liquidation decision.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19132.
Date of creation: Jun 2013
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Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G01 - Financial Economics - - General - - - Financial Crises
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-CBA-2013-06-16 (Central Banking)
- NEP-IAS-2013-06-16 (Insurance Economics)
- NEP-MAC-2013-06-16 (Macroeconomics)
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