Arbeitspapier

Financial crisis resolution

This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks' desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis. I show that a constrained social planner finds it beneficial to introduce a permanent wedge between the deposit rate and the economy's marginal rate of transformation. The wedge improves borrowers' access to finance during a financial crisis by strengthening banks' incentives to provide intermediation services. I propose a simple implementation of the constrained-efficient allocation that limits bank size.

Sprache
Englisch

Erschienen in
Series: Bank of Canada Working Paper ; No. 2012-42

Klassifikation
Wirtschaft
Financial Crises
General Financial Markets: General (includes Measurement and Data)
General Equilibrium and Disequilibrium: Financial Markets
General Financial Markets: Government Policy and Regulation
Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Thema
Financial system regulation and policies
Financial markets

Ereignis
Geistige Schöpfung
(wer)
Schroth, Josef
Ereignis
Veröffentlichung
(wer)
Bank of Canada
(wo)
Ottawa
(wann)
2012

DOI
doi:10.34989/swp-2012-42
Handle
Letzte Aktualisierung
20.09.2024, 08:22 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Schroth, Josef
  • Bank of Canada

Entstanden

  • 2012

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