Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127252
Authors: 
Vinogradov, Dmitri V.
Year of Publication: 
2006
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 431
Abstract: 
Banking regulators often practice forbearance and ambiguity in insolvency resolutions. The paper examines the effects of regulatory forbearance and ambiguity in a context of allocational efficiency. Bailouts, liquidations and their stochastic policy mix lead to suboptimal allocations if banks do not internalize insolvency costs. The policy of forbearance may make banks internalizing such costs and improves the efficiency of intermediation.
Subjects: 
Banks
insolvency resolution
forbearance
constructive ambiguity
JEL: 
D50
E44
G21
G28
Document Type: 
Working Paper

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