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Liquidity, moral hazard and bank crises
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Chatterji , Shurojit and Ghosal, Sayantan (2010) Liquidity, moral hazard and bank crises. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2010 (Number 27).
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Text (Working paper)
WRAP_27.2010_ghosal_bankruns.pdf - Published Version Download (451Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
Bank crises, by interrupting liquidity provision, have been viewed as resulting in welfare losses. In a model of banking with moral hazard, we show that second best bank contracts that improve on autarky ex
ante require costly crises to occur with positive probability at the interim stage. When bank payo§s are partially appropriable, either directly via imposition of Önes or indirectly by the use of bank equity as a collateral, we
argue that an appropriately designed ex-ante regime of policy intervention involving conditional monitoring can prevent bank crises.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Alternative Title: | |||||
Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Banks and banking, Financial crises, Liquidity (Economics), Bank liquidity, Economics -- Mathematical models | ||||
Series Name: | CAGE Online Working Paper Series | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | November 2010 | ||||
Dates: |
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Volume: | Volume 2010 | ||||
Number: | Number 27 | ||||
Number of Pages: | 29 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 |
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