Trading for bailouts

Toni Ahnert, Caio Machado and Ana Pereira

No 17812, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Government interventions such as bailouts are often implemented in times of high uncertainty. Policymakers may therefore rely on information from financial markets to guide their decisions. We study a model in which a policymaker learns from market activity and traders have high private stakes in the intervention. We discuss how the presence of such traders affects intervention outcomes, and show that it reduces market informativeness and the efficiency of bailouts. Regarding normative implications, we show that a higher social cost of interventions and a gradual implementation of assistance can improve market informativeness and raise overall welfare.

JEL-codes: D83 G12 G14 G18 G28 (search for similar items in EconPapers)
Date: 2023-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17812 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Trading for Bailouts (2020)
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:cpr:ceprdp:17812

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17812

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().