Bank failures and fiscal austerity: policy prescriptions for a developing country
This work employs a dynamic general equilibrium model to evaluate the causes and implications of bank insolvencies. The model is applied to stylized data from several South Asian countries. It derives conclusions about policy instruments designed to alleviate the impact of insolvencies. Firms are subject to intertemporal solvency conditions, and the public withdraws deposits when borrowers default. If banks optimize by restricting credit to risky borrowers, these failures can be partially avoided. Numerical simulations conclude that the combination of compensating monetary policy and restrictive fiscal policy offers the best way of responding to a bank crisis caused by exogenous shocks.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ball, Sheryl & Feltenstein, Andrew, 1998. "Basic macroeconomic options for Bangladesh: A numerical analysis," Journal of Asian Economics, Elsevier, vol. 9(2), pages 281-305.
- Pamela Labadie, 1995.
"Financial intermediation and monetary policy in a general equilibrium banking model,"
Finance and Economics Discussion Series
95-8, Board of Governors of the Federal Reserve System (U.S.).
- Pamela Labadie, 1994. "Financial intermediation and monetary policy in a general equilibrium banking model," Proceedings, Federal Reserve Bank of Cleveland, pages 1290-1320.
- Labadie, Pamela, 1995. "Financial Intermediation and Monetary Policy in a General Equilibrium Banking Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1290-1315, November.
- Levy, Santiago, 1987. "A short-run general equilibrium model for a small, open economy," Journal of Development Economics, Elsevier, vol. 25(1), pages 63-88, February.
- Feltenstein, Andrew, 1992. "Oil prices and rural migration: the Dutch disease goes south," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 273-291, June.
- V. V. Chari & Lawrence J. Christiano & Martin Eichenbaum, 1995.
"Inside Money, Outside Money and Short Term Interest Rates,"
NBER Working Papers
5269, National Bureau of Economic Research, Inc.
- V. V. Chari & Lawrence J. Christiano & Martin Eichenbaum, 1994. "Inside money, outside money and short-term interest rates," Proceedings, Federal Reserve Bank of Cleveland, pages 1354-1401.
- Chari, V V & Christiano, Lawrence J & Eichenbaum, Martin, 1995. "Inside Money, Outside Money, and Short-Term Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1354-86, November.
- V.V. Chari & Lawrence J. Christiano & Martin Eichenbaum, 1995. "Inside money, outside money and short term interest rates," Working Paper Series, Macroeconomic Issues 95-13, Federal Reserve Bank of Chicago.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- David E. Altig & Charles T. Carlstrom & Kevin J. Lansing, 1995.
"Computable general-equilibrium models and monetary policy advice,"
9503, Federal Reserve Bank of Cleveland.
- David E. Altig & Charles T. Carlstrom & Kevin J. Lansing, 1994. "Computable general equilibrium models and monetary policy advice," Proceedings, Federal Reserve Bank of Cleveland, pages 1472-1505.
- Altig, David E & Carlstrom, Charles T & Lansing, Kevin J, 1995. "Computable General Equilibrium Models and Monetary Policy Advice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1472-93, November.
- Javier Diaz-Gimenez & Edward C. Prescott & Terry J. Fitzgerald & Fernando Alvarez, 1992.
"Banking in computable general equilibrium economies,"
153, Federal Reserve Bank of Minneapolis.
- Diaz-Gimenez, Javier & Prescott, Edward C. & Fitzgerald, Terry & Alvarez, Fernando, 1992. "Banking in computable general equilibrium economies," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 533-559.
- Feltenstein, Andrew & Shah, Anwar, 1993. "General Equilibrium Effects of Taxation on Investment in a Developing Country: The Case of Pakistan," Public Finance = Finances publiques, , vol. 48(3), pages 366-86.
- Robert C. Merton, 1995.
"Financial Innovation and the Management and Regulation of Financial Institutions,"
NBER Working Papers
5096, National Bureau of Economic Research, Inc.
- Merton, Robert C., 1995. "Financial innovation and the management and regulation of financial institutions," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 461-481, June.
- Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
- de Melo, Jaime, 1988. "Computable general equilibrium models for trade policy analysis in developing countries: A survey," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 469-503.
- Blejer, Mario I. & Feldman, Ernesto V. & Feltenstein, Andrew, 2002. "Exogenous shocks, contagion, and bank soundness: a macroeconomic framework," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 33-52, February.
- Kehoe, Timothy J. & Serra-Puche, Jaime, 1983. "A computational general equilibrium model with endogenous unemployment : An analysis of the 1980 fiscal reform in Mexico," Journal of Public Economics, Elsevier, vol. 22(1), pages 1-26, October.
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:82:y:2001:i:2:p:247-270. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.