Bernard, Benjamin, Capponi, Agostino, Stiglitz, Joseph, (2017), “Bail-ins and bailouts: Incentives, connectivity, and systemic stability”, VoxEU, 18 October
Worried about the cost of public bailouts, governments have proposed bail-ins whereby banks contribute to rescuing their debtors. This column analyses the conditions under which bail-in strategies can be credibly implemented, showing that this heavily depends on the network structure. While earlier work has suggested that denser networks are socially preferred to more sparsely connected networks, the opposite holds in the presence of the government’s strategic intervention.
Relevant Posts
- Beck, Thorsten, (2017), «The European banking union at three: A toddler with tantrums», Vox Eu, 3 July 2017
- Beck, Thorsten, Samuel Da-Rocha-Lopes, Samuel, Silva, Andre, (2017), «Bank bail-in: The effects on credit supply and real economy», VoxEU, 26 May