Hidden Bibliographic Details
| Other authors / contributors: | Mody, Ashoka.
International Monetary Fund. European Department.
International Monetary Fund. Research Department.
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| ISBN: | 1462345611
9781462345618
1452799466
9781452799469
128356128X
9781283561280
9786613873736
661387373X
1451920288
9781451920284
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| Digital file characteristics: | text file
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| Notes: | Includes bibliographical references (pages 27-28).
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2010.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
English.
digitized 2010 HathiTrust Digital Library committed to preserve
Print version record.
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| Summary: | In a rational-expectations framework, we model depositors' confidence as a function of the probability of future bank bailouts. We analyze the effect of alternative bank bailout policies on depositors' confidence in an emerging market setting, where liquidity shortages of banks are revealed sequentially and governments cannot credibly commit to bailing out all potentially distressed banks. Our findings suggest that allowing early bank failures and using available liquidity for credible commitments to later bailouts can better boost confidence than early bailouts. This conclusion arises because with a high chance of liquidity shortage in the future, depositors may lose confidence and hence withdraw deposits even from potentially sound banks. Such a policy of late bailouts is likely to receive political support when a full bailout needs to be financed by taxation. The logic of late bailout remains valid even when banks may hide their distress or when closures of early distressed banks create contagion.
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| Other form: | Print version: Kim, Se-Jik, 1960- Managing confidence in emerging market bank runs. [Washington, D.C.] : International Monetary Fund, ©2004
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