Working Paper No. 13-28/r Banking Crises and the Role of Bank Coalitions
نویسندگان
چکیده
I study the e¤ectiveness of bank coalition formation in response to an external aggregate shock that may cause disruption to the payment mechanism and trading activity. I show that a speci c type of bank coalition (a joint-liability arrangement) is an e¤ective arrangement that allows member banks to build a capital bu¤er that permits them to absorb the e¤ects of an external shock. In particular, it allows society to completely prevent any disruption to trading activity that can be caused by a temporary drop in the aggregate value of banking assets, at least in the case of a shock that is not too big. If the shock is relatively large, then a bank coalition will be unable to completely prevent a disruption in trading activity even though it will be able to substantially mitigate the e¤ects of the shock. Thus, the existence of a private bank coalition of the kind considered in this paper can be an e¤ective means of preventing signi cant disruptions in trading activity. Keywords: bank coalition, banking crisis, payment system JEL classi cations: E42, G01, G21
منابع مشابه
Working Paper No. 13-28 Banking Crises and the Role of Bank Coalitions
The goal of this paper is to provide a framework to analyze the e¤ectiveness of bank coalition formation in response to an external aggregate shock that may cause disruption to the payment mechanism and real economic activity. I show that the kind of insurance mechanism provided by a speci c type of bank coalition allows society to completely prevent any disruption to real activity that can be ...
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