The Funds Concentration Effect and Discriminatory Bailout
In the presence of macroeconomic shocks severe enough to threaten the liquidity or solvency of the banking system, the regulator can rely on the funds concentration effect to save long-term investment projects. Some banks are forced into bankruptcy with the result that other banks obtain more new funds and remain solvent. We investigate two different implementations of the funds concentration effect and the corresponding discriminatory bailout scheme: “random bailout“ and “bailout the big ones“. While the latter can be problematic in terms of stability, it is superior to the former in terms of welfare and credibility.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Hans Gersbach, 2002. "Financial Intermediation and the Creation of Macroeconomic Risks," CESifo Working Paper Series 695, CESifo Group Munich.
- Marvin Goodfriend & Jeffrey M. Lacker, 1999.
"Limited commitment and central bank lending,"
99-02, Federal Reserve Bank of Richmond.
- Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
- Xavier Freixas, 1999. "Optimal Bail Out Policy, Conditionality and Creative Ambiguity," FMG Discussion Papers dp327, Financial Markets Group.
- Mailath George J. & Mester Loretta J., 1994.
"A Positive Analysis of Bank Closure,"
Journal of Financial Intermediation,
Elsevier, vol. 3(3), pages 272-299, June.
- Fries,S. & Mella-Barral,P. & Perraudin,W.R.M., 1995.
"Optimal Bank Reorganisation and the Fair Pricing of Deposit Garantees,"
Cambridge Working Papers in Economics
9417, Faculty of Economics, University of Cambridge.
- Fries, Steven & Mella-Barral, Pierre & Perraudin, William, 1997. "Optimal bank reorganization and the fair pricing of deposit guarantees," Journal of Banking & Finance, Elsevier, vol. 21(4), pages 441-468, April.
- Diamond, Douglas W & Dybvig, Philip H, 1983.
"Bank Runs, Deposit Insurance, and Liquidity,"
Journal of Political Economy,
University of Chicago Press, vol. 91(3), pages 401-19, June.
- Repullo, Rafael, 2000.
"Who Should Act as Lender of Last Resort? An Incomplete Contracts Model,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 32(3), pages 580-605, August.
- Rafael Repullo, 2000. "Who should act as lender of last resort? an incomplete contracts model," Proceedings, Federal Reserve Bank of Cleveland, pages 580-610.
- Repullo, R., 1999. "Who Should Act as Lender of Last Resort? An Incomplete Contracts Model," Papers 9913, Centro de Estudios Monetarios Y Financieros-.
- Eduardo Levy Yeyati & Tito Cordella, 1999.
"Bank Bailouts; Moral Hazard vs. Value Effect,"
IMF Working Papers
99/106, International Monetary Fund.
- Charles A. E. Goodhart & Haizhou Huang, 1999.
"A model of the lender of last resort,"
Federal Reserve Bank of San Francisco.
- Bhattacharya, S. & Boot, A.W.A. & Thakor, A.V., 1995.
"The Economics of Bank Regulation,"
9516, Centro de Estudios Monetarios Y Financieros-.
- Boot, Arnoud W A & Thakor, Anjan V, 1993. "Self-Interested Bank Regulation," American Economic Review, American Economic Association, vol. 83(2), pages 206-12, May.
- Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
- Acharya, Sankarshan & Dreyfus, Jean-Francois, 1989. " Optimal Bank Reorganization Policies and the Pricing of Federal Deposit Insurance," Journal of Finance, American Finance Association, vol. 44(5), pages 1313-33, December.
- Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
- Morris, Stephen & Shin, Hyun Song, 1999. "Risk Management with Interdependent Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 52-62, Autumn.
- Martin Hellwig, 1995. "Systemic Aspects of Risk Management in Banking and Finance," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(IV), pages 723-737, December.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_591. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.