Efficient Bailouts?

Javier Bianchi

No 18587, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a quantitative equilibrium model of financial crises to assess the interaction between ex-post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the severity of the recession. Ex ante, the anticipation of such bailouts leads to an increase in risk-taking, making the economy more vulnerable to a financial crisis. We find that moral hazard effects are limited if bailouts are systemic and broad-based. If bailouts are idiosyncratic and targeted, however, this makes the economy significantly more exposed to financial crises.

JEL-codes: E2 E20 E3 E32 E44 E6 F40 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mac
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Javier Bianchi, 2016. "Efficient Bailouts?," American Economic Review, vol 106(12), pages 3607-3659.

Downloads: (external link)
http://www.nber.org/papers/w18587.pdf (application/pdf)

Related works:
Journal Article: Efficient Bailouts? (2016)
Working Paper: Efficient Bailouts? (2016)
Working Paper: Efficient bailouts? (2012)
Working Paper: Efficient Bailouts? (2012)
Working Paper: Efficient Bailouts? (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:18587

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w18587

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().