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Bank Bailouts, International Linkages and Cooperation (Niepmann F., Schmidt-Eisenlohr T.)

Contagion in Banking Financial Crises

Abstract Financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. We provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation losses and intra- and inter-country income inequality, in the non-cooperative game between governments there are inefficiencies due to externalities, no burden sharing and free-riding. We show that, in absence of cooperation, stronger interbank linkages make government interests diverge, whereas cross-border asset holdings tend to align them. We analyze different forms of cooperation and their effects on global and national welfare.
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Libref/ Niepmann F., Schmidt-Eisenlohr T. (2010) “Bank Bail-outs, International Linkages and Cooperation”, Oxford University Centre for Business Taxation Working Paper No. 10/16, pp. 1-65
© Программирование — Александр Красильников, 2008
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