Arbeitspapier
Government guarantees and financial stability
Banks are intrinsically fragile because of their role as liquidity providers. This results in under-provision of liquidity. We analyze the effect of government guarantees on the interconnection between banks' liquidity creation and likelihood of runs in a model of global games, where banks.and depositors' behavior are endogenous and affected by the amount and form of guarantee. The main insight of our analysis is that guarantees are welfare improving because they induce banks to improve liquidity provision although in a way that sometimes increases the likelihood of runs or creates distortions in banks' behavior.
- ISBN
-
978-92-899-2754-3
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 2032
- Classification
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
- Subject
-
panic runs
fundamental runs
government guarantees
bank moral hazard
- Event
-
Geistige Schöpfung
- (who)
-
Allen, Franklin
Carletti, Elena
Goldstein, Itay
Leonello, Agnese
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2017
- DOI
-
doi:10.2866/46276
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Allen, Franklin
- Carletti, Elena
- Goldstein, Itay
- Leonello, Agnese
- European Central Bank (ECB)
Time of origin
- 2017
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