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The Workout of Banking Crises: A Macroeconomic Perspective

Author

Listed:
  • Hans Gersbach
  • Jan Wenzelburger

Abstract

This paper provides a macroeconomic perspective for government interventions in banking crisis. Such crisis occur when a large number of banks fail to meet capital requirements or are insolvent. Using a macroeconomic model with financial intermediation, our analyis suggests that strict enforcement of capital-adequate rules suffices in prosperous periods. Capital requirements serve as an indicator for crises interventions in critical states which may require interest rate intervention and restructuring of the banking industry. These policies can be reinforced by random bailouts and temporary financial relief, with a large percentage of the costs being covered by current and future owners of banks. (JEL D41, E4, G2)

Suggested Citation

  • Hans Gersbach & Jan Wenzelburger, 2003. "The Workout of Banking Crises: A Macroeconomic Perspective," CESifo Economic Studies, CESifo Group, vol. 49(2), pages 233-258.
    • Handle: RePEc:oup:cesifo:v:49:y:2003:i:2:p:233-258.
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    File URL: http://hdl.handle.net/10.1093/cesifo/49.2.233
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    Citations

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    Cited by:

    1. Jürgen Eichberger & Martin Summer, 2005. "Bank Capital, Liquidity, and Systemic Risk," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 547-555, 04/05.
    2. repec:onb:oenbwp:y::i:87:b:1 is not listed on IDEAS
    3. Dmitri Vinogradov, 2003. "Macroeconomic evolution after a shock: the role for financial intermediation," Macroeconomics 0310007, University Library of Munich, Germany.
    4. Dmitri Vinogradov, 2004. "Macroeconomic evolution aftera shock: the role of financial intermediation," Money Macro and Finance (MMF) Research Group Conference 2003 106, Money Macro and Finance Research Group.
    5. Dmitri Vinogradov, 2005. "Banks versus Markets in Processing the Payments Shock," Finance 0506004, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services

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