Intrinsic moral hazard

Arbeitspapier

The paper argues that financial deregulation incentivized financial firms to take excessive risks and over-expand because it turned social insurance against systemic risk into a common pool (or open) resource. The increased size and complexity of deregulated financial markets in turn raised the social cost of imposing discipline in financial markets to prohibitive levels. Because this undermined the credibility of the regulators' threats of sanction, their deterrence strategy was from then on subgame imperfect. This suggests that moral hazard can be explained by the market expectation that regulators would act like a rational maximizer rather than by the things they irrationally did or not do.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2019-03

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Game Theory and Bargaining Theory: General ; Financial Institutions and Services: General ; General Financial Markets: Government Policy and Regulation
• Thema: systemic risk ; moral hazard ; financial deregulation ; coordination failure ; excessive risk taking and financial crisis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ertürk, Korkut A.
• Ereignis: Veröffentlichung
• (wer): The University of Utah, Department of Economics
• (wo): Salt Lake City, UT
• (wann): 2019

Weitere Informationen

• Handle: http://hdl.handle.net/10419/261009
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ