Schilling, Linda (2024): Smooth Regulatory Intervention.
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Abstract
Policy makers have developed different forms of policy intervention for stopping, or preventing runs on financial firms. This paper provides a general framework to characterize the types of policy intervention that indeed lower the run-propensity of investors versus those that cause adverse investor behavior, which increases the run-propensity. I employ a general global game to analyze and compare a large set of regulatory policies. I show that common policies such as Emergency Liquidity Assistance, and redemption (withdrawal) fees either exhibit features that lower firm stability ex ante, or have offsetting features rendering the policy ineffective.
Item Type: | MPRA Paper |
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Original Title: | Smooth Regulatory Intervention |
Language: | English |
Keywords: | financial regulation, bank runs, global games, policy effectiveness, bank resolution, withdrawal fees, emergency liquidity assistance, lender of last resort policies, money market mutual fund gates, suspension of convertibility |
Subjects: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation |
Item ID: | 120041 |
Depositing User: | Linda Schilling |
Date Deposited: | 12 Feb 2024 14:44 |
Last Modified: | 12 Feb 2024 14:45 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/120041 |