Arbeitspapier
Banking Panics and the Lender of Last Resort in a Monetary Economy
This paper studies the role of a lender of last resort (LLR) in a monetary model where a shortage of bank’s monetary reserves (or a banking panic) occurs endogenously. We show that while a discount window policy introduced by the LLR is welfare improving, it reduces the banks’ ex ante incentive to hold reserves, which increases the probability of a panic, and causes moral hazard in asset investments. We also examine the combined effect of other related policies such as a penalty in lending rate, liquidity requirements, and constructive ambiguity.
- Sprache
-
Englisch
- Erschienen in
-
Series: Tinbergen Institute Discussion Paper ; No. TI 2019-002/V
- Klassifikation
-
Wirtschaft
Money and Interest Rates: General
- Thema
-
Monetary Equilibrium
Banking Panic
Moral Hazard
Lender of Last Resort
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Watanabe, Makoto
Matsuoka, Tarishi
- Ereignis
-
Veröffentlichung
- (wer)
-
Tinbergen Institute
- (wo)
-
Amsterdam and Rotterdam
- (wann)
-
2019
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Watanabe, Makoto
- Matsuoka, Tarishi
- Tinbergen Institute
Entstanden
- 2019
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