IDEAS home Printed from https://ideas.repec.org/a/rpo/ripoec/v95y2005i6p135-165.html
   My bibliography  Save this article

The Role of Preference Structure and Moral Hazard in a Multiple Equilibria. Model of Financial Crises

Author

Listed:
  • Sergio Masciantonio

    () (Università degli Studi "Roma Tre")

Abstract

This paper proposes an analysis of financial crises by a multiple equilibria model, based on the assumption of common knowledge. This model modifies and broadens the Corsetti, Guimaraes and Roubini (2003) model based on global games theory. In the first part we assert the implications for the International Monetary Fund (IMF) as an international lender of last resort, utilising existing literature based on multiple equilibria models. In the second part, we extend the analysis and highlight the interesting implications. The model predicts the IMF should not be too conservative in its decisions, while avoiding the excessive liquidity supports, which can lead to moral hazard distortions.

Suggested Citation

  • Sergio Masciantonio, 2005. "The Role of Preference Structure and Moral Hazard in a Multiple Equilibria. Model of Financial Crises," Rivista di Politica Economica, SIPI Spa, vol. 95(6), pages 135-165, November-.
  • Handle: RePEc:rpo:ripoec:v:95:y:2005:i:6:p:135-165
    as

    Download full text from publisher

    File URL: http://www.rivistapoliticaeconomica.it/2005/nov-dic/Masciantonio_eng.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Xavier Vives, 2004. "Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 1116-1147, December.
    2. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
    3. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 9-30, Fall.
    4. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
    5. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    6. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    7. Olivier Jeanne & Charles Wyplosz, 2003. "The International Lender of Last Resort. How Large Is Large Enough?," NBER Chapters,in: Managing Currency Crises in Emerging Markets, pages 89-124 National Bureau of Economic Research, Inc.
    8. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
    9. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    10. Roberto Chang & Andres Velasco, 2001. "A Model of Financial Crises in Emerging Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 489-517.
    11. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    12. Michael P. Dooley & Sujata Verma, 2003. "Rescue Packages and Output Losses Following Crises," NBER Chapters,in: Managing Currency Crises in Emerging Markets, pages 125-186 National Bureau of Economic Research, Inc.
    13. Jeffrey D. Sachs, 1999. "Creditor Panics: Causes and Remedies," Cato Journal, Cato Journal, Cato Institute, vol. 18(3), pages 377-390, Winter.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rpo:ripoec:v:95:y:2005:i:6:p:135-165. 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: (Sabrina Marino). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.