Efficient Bailouts ? ∗ Javier Bianchi Wisconsin & NYU January 2012

Efficient Bailouts ? ∗ Javier Bianchi

This paper develops a non-linear DSGE model to assess the interaction between ex-post interventions in credit markets and the build-up of risk ex ante. During a systemic crisis, bailouts to the financial sector relax balance sheet constraints and accelerate the economic recovery. Ex ante, the anticipation of such bailouts leads to an increase in risk-taking, making the economy more vulnerable t...

Efficient Bailouts? - 2012 Institute events - Dallas Fed

This paper develops a non-linear DSGE model to assess the interaction between ex-post interventions in credit markets and the build-up of risk ex ante. During a systemic crisis, bailouts to the financial sector relax balance sheet constraints and accelerate the economic recovery. Ex ante, the anticipation of such bailouts leads to an increase in risk-taking, making the economy more vulnerable t...

Dr. Nasser Maleki (January 25, 1953 – January 6, 2012)

A Model of Optimal Government Bailouts

We analyze incentive-efficient government bailouts within a canonical model of intra-firm moral hazard. Bailouts exacerbate the moral hazard of firms and managers in two ways. First, they make them less averse to failing. Second, the taxes to fund bailouts dampen their incentives. Nevertheless, if third-party externalities from keeping the firm alive are strong, bailouts can improve welfare. Ou...

Hadronic light-by-light scattering and the pion polarizability

Kevin T. Engel, Hiren H. Patel, and Michael J. Ramsey-Musolf California Institute of Technology, Pasadena, California 91125, USA Department of Physics, University of Wisconsin, Madison, Wisconsin 53706, USA Department of Physics, University of Wisconsin, Madison, Wisconsin 53706, USA and Kellogg Radiation Laboratory, California Institute of Technology, Pasadena, California 91125, USA (Received ...