EconStor >
Rutgers University >
Department of Economics, Rutgers University >
Working Papers, Department of Economics, Rutgers University >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/59480
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorShino, Junnosukeen_US
dc.date.accessioned2012-06-25T11:57:28Z-
dc.date.available2012-06-25T11:57:28Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/59480-
dc.description.abstractRecent funding problems experienced by European sovereigns and the subsequent policy actions taken by European authorities have renewed interest in the international Lender of Last Resort (LLR). This paper constructs a global game LLR model applicable to both domestic and international contexts, and revisits Bagehot's classical statements about the LLR. Compared with the existing literature, our model can be characterized by the following assumptions: (1) the (domestic or international) LLR authority is an explicit player whose preference is based on the soundness of its own balance sheet as well as on whether commercial banks fail, (2) the authority cannot distinguish solvency and insolvency of the LLR user ex ante, (3) LLR lending rates are endogenously determined, and (4) the authority's decision making is set after observing depositors' aggregate behaviors. With this setup, we show that: (1) depositors' aggregate behavior of withdrawing their deposits operates as a perfect signal to the LLR authority about solvency, (2) the authority's optimal policy is to help only illiquid but solvent banks, (3) whenever the LLR facility is utilized, optimal lending rates are strictly positive, and (4) this optimal lending rates are punitive in the sense that they take the highest level possible under the restriction that the rates enable solvent but illiquid banks to survive. These results generally support Bagehot's statements as well as historical and current operations of LLR taken by international institutions and central banks.en_US
dc.language.isoengen_US
dc.publisherDep. of Economics, Rutgers, the State Univ. of New Jersey New Brunswick, NJen_US
dc.relation.ispartofseriesWorking Papers, Department of Economics, Rutgers, the State University of New Jersey 2010,07en_US
dc.subject.jelC72en_US
dc.subject.jelG28en_US
dc.subject.ddc330en_US
dc.subject.stwLender of Last Resorten_US
dc.subject.stwBankenliquiditäten_US
dc.subject.stwBankinsolvenzen_US
dc.subject.stwSpieltheorieen_US
dc.subject.stwTheorieen_US
dc.titleLender of last resort policy in a global game and the role of depositors' aggregate behavior as signalingen_US
dc.typeWorking Paperen_US
dc.identifier.ppn63588237Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Working Papers, Department of Economics, Rutgers University

Files in This Item:
File Description SizeFormat
63588237X.pdf212.52 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.