Runs versus Lemons: Information Disclosure and Fiscal Capacity

Thomas Philippon (), Miguel Faria e castro and Joseba Martinez
Authors registered in the RePEc Author Service: Miguel Faria-e-Castro

No 11408, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the optimal use of disclosure and fiscal backstops during financial crises. Providing information can reduce adverse selection in credit markets, but negative disclosures can also trigger inefficient bank runs. In our model governments are thus forced to choose between runs and lemons. A fiscal backstop mitigates the risk of runs and allows a government to pursue a high disclosure strategy. Our model explains why governments with strong fiscal positions are more likely to run informative stress tests, and, paradoxically, how they can end up spending less than governments that are more fiscally constrained.

JEL-codes: E5 E6 G1 G2 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-cfn and nep-mac
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Runs versus Lemons: Information Disclosure and Fiscal Capacity (2017)
Working Paper: Runs versus Lemons: Information Disclosure and Fiscal Capacity (2015)
Working Paper: Runs versus Lemons: Information Disclosure and Fiscal Capacity (2015)
Working Paper: Runs versus Lemons: Information Disclosure and Fiscal Capacity (2015)
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