Bailout uncertainty in a microfounded general equilibrium model of the financial system
Alex Cukierman () and
Journal of Banking & Finance, 2015, vol. 52, issue C, 160-179
This paper develops a micro-founded general equilibrium model of the financial system composed of ultimate borrowers, ultimate lenders and financial intermediaries. The model is used to investigate the impact of uncertainty about the likelihood of governmental bailouts on leverage, interest rates, the volume of defaults and the real economy. The distinction between risk and uncertainty is implemented by applying the multiple priors framework to beliefs about the probability of bailout.
Keywords: Risk; Uncertainty; Lehman’s default; Leverage; Financial intermediaries; Bailouts; Duration mismatches (search for similar items in EconPapers)
JEL-codes: G01 G11 G2 G18 E3 E4 E5 E6 D81 D83 (search for similar items in EconPapers)
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Working Paper: Bailout Uncertainty in a Microfounded General Equilibrium Model of the Financial System (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:52:y:2015:i:c:p:160-179
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