The Experts below are selected from a list of 14907 Experts worldwide ranked by ideXlab platform
Irina M. Stângă - One of the best experts on this subject based on the ideXlab platform.
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Bank Bailouts and bank-sovereign risk contagion channels
Journal of International Money and Finance, 2014Co-Authors: Irina M. StângăAbstract:Bank Bailouts generate risk spillovers between the default risks of banks and governments. This paper quantifies the effects of bank Bailouts and measures the interdependence risk between the banking sector and government for the US and six European countries. The approach allows to distinguish two channels of contagion by identifying Bailout and sovereign risk shocks and assessing their effects on the default risks of banks and governments. In contrast to Europe, a Bailout shock generates a persistent decrease in the default risk of the US banking sector. The bank-sovereign risk contagion is stronger in Europe relative to the US.
Ernesto Pasten - One of the best experts on this subject based on the ideXlab platform.
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Prudential Policies and Bailouts - A Delicate Interaction
Review of Economic Dynamics, 2020Co-Authors: Ernesto PastenAbstract:Could prudential policies backfire by making the lack of commitment problem of Bailouts worse? This commitment problem refers to the excessive risk taken by banks and financial institutions in expectations of Bailouts if crises occur, which in turn increase financial fragility and the severity of crises. Ex-ante policies, such as prudential policies, have a variety of effects on the various components of the ex-post incentives of an authority to implementing a Bailout. Thus, the interaction between prudential policies and Bailouts is delicate: In different conditions, a given prudential policy may backfire or increase its effectiveness by worsening or alleviating the lack of commitment problem of Bailouts. Liquidity requirements and prudential taxes are examples of prudential policies that may backfire. Public debt is an example of an ex-ante policy usually with no prudential motivation that may play such a role. (Copyright: Elsevier)
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Bailouts and Prudential Policies - A Delicate Interaction
2014Co-Authors: Ernesto PastenAbstract:Could prudential policies backfire by making the lack of commitment problem of Bailouts worse? This commitment problem refers to the excessive risk taken by banks and financial institutions in expectations of Bailouts if crises occur, which in turn increase financial fragility and the severity of crises. Ex-ante policies, such as prudential policies, have a variety of effects on the various components of the ex-post incentives of an authority to implementing a Bailout. Thus, the interaction between prudential policies and Bailouts is delicate: In different conditions, a given prudential policy may backfire or increase its effectiveness by worsening or alleviating the lack of commitment problem of Bailouts. Liquidity requirements and prudential taxes are examples of prudential policies that may backfire. Public debt is an example of an ex-ante policy usually with no prudential motivation that may play such a role.
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Time-Consistent Bailout Plans
2011Co-Authors: Ernesto PastenAbstract:Bailout policy is time-inconsistent, which results in multiple equilibria characterized by too much leverage, high risk correlation and little liquidity holding. I show that a long-run horizon allows the policy-maker to define Bailout plans that rule out the worse equilibria. This result contrasts with the standard finding in environments with a unique equilibrium, as in most applications, in which a long-run horizon allows the policy-maker to support superior outcomes in equilibrium. I use this framework to discuss the effectiveness of three prudential policy proposals: too-big-to-fail size caps, taxes on borrowing and liquidity requirements. I also argue that policies alleviating the time-inconsistency of Bailouts may generate large welfare gains. In this regard, I discuss three alternatives: policies against the scarcity of liquidity during crises, Bailout design, and public debt.
Klaas Staal - One of the best experts on this subject based on the ideXlab platform.
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Public debt, Bailouts, and common bonds
International Tax and Public Finance, 2016Co-Authors: Zarko Y. Kalamov, Klaas StaalAbstract:Abstract We look at a model where countries of different sizes provide local public goods with positive spillovers. Matching grants can give rise to optimal expenditure levels, but countries can induce Bailouts. We study the characteristics of these Bailouts in a subgame-perfect Nash equilibrium and how these characteristics are affected by the introduction of common bonds. Partial substitution of common for sovereign bonds has two implications. First, it lowers the average and marginal borrowing costs of countries which may be eligible for Bailouts. This effect leads to higher borrowing in these countries irrespective of their Bailout expectations. Second, the lower borrowing costs mitigate the incentives of countries to induce a Bailout and, therefore, constrain the parameter set for which a soft budget constraint equilibrium exists. As a result, the introduction of common bonds can also be in the interest of those countries that provide the Bailouts.
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Public Debt, Bailouts and Common Bonds
2015Co-Authors: Zarko Y. Kalamov, Klaas StaalAbstract:We look at a model where countries of di fferent size provide local public goods with positive spillovers. Matching grants can induce socially-e fficient expenditure levels, but countries can induce Bailouts. We consider the characteristics of these Bailouts in a subgame-perfect Nash equilibrium and how these characteristics are a ffected by the introduction of common bonds. Partial substitution of common for sovereign bonds has two implications. First, it lowers the average and marginal borrowing costs of countries, which may be eligible for Bailouts. This eff ect leads to higher borrowing in these countries irrespective of their Bailout expectations. Second, the lower borrowing costs mitigate the incentives of countries to induce a Bailout and, therefore, constrain parameter set for which a soft budget constraint equilibrium exists.
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Size, spillovers and soft budget constraints
International Tax and Public Finance, 2013Co-Authors: Ernesto Crivelli, Klaas StaalAbstract:There is much evidence against the so-called “too big to fail” hypothesis in the case of Bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce socially-efficient provision, but districts can still exploit the intervening central government by inducing direct financing. We show that the ability and willingness of a district to induce a Bailout and district size are negatively correlated. Furthermore, we argue that these policies can be equilibrium strategies.
Peter N. Posch - One of the best experts on this subject based on the ideXlab platform.
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Predatory Short Sales and Bailouts
German Economic Review, 2019Co-Authors: Sebastian Kranz, Gunter Löffler, Peter N. PoschAbstract:Abstract This paper extends the literature on predatory short selling and Bailouts through a joint analysis of the two. We consider a model with informed short sales, as well as uninformed predatory short sales, which can trigger the inefficient liquidation of a firm. We obtain several novel results: A government commitment to bail out insolvent firms with positive probability can increase welfare because it selectively deters predatory short selling without hampering desirable informed short sales. Contrasting a common view, Bailouts can be optimal ex ante but undesirable ex post. Furthermore, Bailouts in our model are a better policy tool than short selling restrictions. Welfare gains from the Bailout policy are unevenly distributed: shareholders gain while taxpayers lose. Bailout taxes allow ex ante Pareto improvements.
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Predatory Short Sales and Bailouts
SSRN Electronic Journal, 2015Co-Authors: Sebastian Kranz, Gunter Löffler, Peter N. PoschAbstract:This paper extends the literature on predatory short selling and Bailouts through a joint analysis of the two. We consider a model with informed short sales, as well as predatory short sales by an uninformed investor, which can trigger the inefficient liquidation of a firm. We obtain several novel results: A goverment commitment to bail out insolvent firms with positive probability can increase welfare because it selectively deters predatory short selling without hampering desirable informed short sales. Contrasting a common view, Bailouts can be optimal ex ante but undesirable ex post. Furthermore, Bailouts in our model are a better policy tool than short selling restrictions. Welfare gains from the Bailout policy are unevenly distributed: shareholders gain while taxpayers lose. Bailout taxes allow ex-ante Pareto improvements.
David Leblang - One of the best experts on this subject based on the ideXlab platform.
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sovereign debt migration pressure and government survival
Comparative Political Studies, 2016Co-Authors: William T Bernhard, David LeblangAbstract:As soon as the sovereign debt crisis began, it was widely understood that Germany’s response would dictate its ultimate resolution. Whereas the initial round of Bailouts stabilized markets and preserved the Euro, the purpose of the second Greek Bailout is less clear. We argue that the German government’s decision to support a second Greek Bailout reflected domestic political calculations. While a Bailout would involve short-term political costs, Merkel’s government also recognized the social and economic consequences of potential Greek default. In particular, a default entailed the prospect of a massive inflow of migrants from Southern Europe into Germany, which would have hurt labor markets and, in turn, could have cost Merkel’s coalition electoral support. To evaluate the political, economic, and social costs of the second Greek Bailout, we use models of credit default swap spreads, studies of international migration, and research on vote intention.
