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Bank Bailouts Moral Hazard vs. Value Effect

This paper shows that a central bank, by announcing and committing ex-ante to a bailout policy that is contingent on the realization of certain states of nature (for example on the occurrence of an adverse macroeconomic shock), creates a risk-reducing “value effect” that more than outweighs the mora...

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Bibliographic Details
Main Author: Levy Yeyati, Eduardo
Other Authors: Cordella, Tito
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1999
Series:IMF Working Papers
Subjects:
Financial Risk Management
Economic & Financial Crises & Disasters
Central Banks And Their Policies
Deposit Insurance
Interest Rates: Determination, Term Structure, And Effects
Finance
Micro Finance Institutions
Interest Rates
Lender Of Last Resort
Financial Markets And The Macroeconomy
Financial Institutions And Services: Government Policy And Regulation
Banks
Banks And Banking
Crisis Management
Depository Institutions
Finance: General
Deposit Rates
Mortgages
Banking
Moral Hazard
Asymmetric And Private Information
General Financial Markets: Government Policy And Regulation
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper shows that a central bank, by announcing and committing ex-ante to a bailout policy that is contingent on the realization of certain states of nature (for example on the occurrence of an adverse macroeconomic shock), creates a risk-reducing “value effect” that more than outweighs the moral hazard component of such a policy
Physical Description:30 pages
ISBN:9781451852875

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