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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/137

Title: Crony capitalism, bail-outs and bank runs
Authors: Femminis, Gianluca
Ruggerone, Luigi
Issue Date: 1999
Publisher: CEIS
Series/Report no.: Quaderni CEIS; 124
Abstract: We present a simple model where bank runs are possible and we analyse the role of subsidisation of future investment in this setting. We find that such a policy exacerbates the short-run liquidity problem for banks. Moreover, we highlight that a "shift in expectations" about the keeping of the subsidisation promises induces itself a bank run. We show how a bank recapitalisation may help solving the problem; in fact, it can make credible an "ex post" recovery of the banking system, thus preventing the shift in expectation from generating a self-fulfilling bank crisis.
URI: http://hdl.handle.net/2108/137
Appears in Collections:Quaderni

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