Bank bailouts, international linkages and cooperation

Arbeitspapier

Financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. We provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation losses and intra- and inter-country income inequality, in the non-cooperative game between governments there are inefficiencies due to externalities, no burden sharing and free-riding. We show that, in absence of cooperation, stronger interbank linkages make government interests diverge, whereas cross-border asset holdings tend to align them. We analyze different forms of cooperation and their effects on global and national welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3384

Classification and Topics

• Classification: Wirtschaft ; Financial Aspects of Economic Integration ; International Policy Coordination and Transmission ; Financial Crises ; Financial Institutions and Services: Government Policy and Regulation
• Subject: bailout ; contagion ; financial crisis ; international institutional arrangements ; Finanzmarktkrise ; Bankenkrise ; Schuldenübernahme ; Ansteckungseffekt ; Internationale wirtschaftspolitische Koordination

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Niepmann, Friederike ; Schmidt-Eisenlohr, Tim
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/46237
• Last update: 10.03.2025, 11:43 AM CET