Electronic Resource
Oxford, UK; Malden, USA
:
Blackwell Publishing Ltd/Inc.
Bulletin of economic research
57 (2005), S. 0
ISSN:
1467-8586
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
This article highlights the spread of bank panics across countries, as the public reassesses governments' propensity to bailouts. Policymakers decide whether to save collapsing banking systems by weighing social costs of crises against the costs associated with raising taxes to finance rescue packages. Policymakers know those social costs of bank liquidation whereas the public does not. In this setup, financial crises may result from the public's self-fulfilling prophecies about equilibrium outcomes, as lenders' expectations impinge on the taxation cost of bailouts. It follows that a banking crisis in a country leads creditors to reexamine policymakers' willingness to bailouts in other countries, which eventually makes their banks more vulnerable to self-confirming depositors' runs.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1467-8586.2005.00216.x
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