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Bank Bailouts, International Linkages and Cooperation

Abstract:

Financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. We provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation losses and intra- and intercountry income inequality, in the non-cooperative game between governments there are inefficiencies due to externalities, no burden sharing and free-riding. We show that, in...

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Friederike Niepmann More by this author
Tim Schmidt-Eisenlohr More by this author
Publication date:
2010-11-05
URN:
uuid:861cc186-8fab-411d-a3ec-314cc1778a7f
Local pid:
oai:eureka.sbs.ox.ac.uk:588

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