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Autor:innen: 
Erscheinungsjahr: 
2020
Schriftenreihe/Nr.: 
SAFE Working Paper No. 292
Verlag: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Zusammenfassung: 
This paper studies the link between bank recapitalization and welfare in a dynamic production economy. The model features financial frictions because banks benefit of a cost advantage at monitoring firms and face costly equity issuance. The competitive equilibrium outcome is inecient because agents do not internalize the effects banks' capitalization over the allocation of capital, its price and, in turn, firms investments. It follows, individual recapitalizations are sub-optimal and bailout policies may benefit social welfare in the long-run. Bailouts improve capital allocation in states where aggregate banks are poorly capitalized, therefore enhancing their market valuation, fostering investments, and stabilizing the economy recovery path.
Schlagwörter: 
banks
bailout
general equilibrium
financial frictions
recapitalization
welfare
JEL: 
D51
G21
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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