Using disaster planning to optimize expenditures on financial safety nets
Using a multiperiod model, this paper offers a benchmark standard for efficient safety net management. This standard embodies a market-mimicking strategy for identifying, preventing, and resolving bank insolvencies. Around the world, governmental reluctance to acknowledge weaknesses in their crisis prevention efforts supports an underinvestment in contingent plans for handling financial disaster. The model features the hypothesis that this underinvestment misserves taxpayers by increasing the ability of stakeholders in insolvent banks to extract implicit and explicit subsidies when and as the threat of an actual crisis intensifies. Copyright International Atlantic Economic Society 2001
Volume (Year): 29 (2001)
Issue (Month): 3 (September)
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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.:
- Laeven, Luc, 2000. "Banking risks around the world - the implicit safety net subsidy approach," Policy Research Working Paper Series 2473, The World Bank.
- Walker F. Todd, 1994. "Lessons from the collapse of three state-chartered private deposit insurance funds," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
- Demirguc-Kunt, Asli & Detragiache, Enrica, 2002.
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- Asli Demirguc-Kunt & Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation," Econometric Society World Congress 2000 Contributed Papers 1751, Econometric Society.
- Asli Demirgüç-Kunt & Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability?," IMF Working Papers 00/3, International Monetary Fund. Full references (including those not matched with items on IDEAS)