Bail Out or Work Out? Theoretical Considerations
Bibliographic Data
| ID | 9715764 |
|---|---|
| Authors | Andrew G Haldane (Bank of England), Andrew Haldane, Gregor Irwin (Bank of England), Victoria Saporta (Bank of England) |
| Year | 2004 |
| Volume | 114 |
| Issue | 494 |
| Pages | C130-C148 |
| Publication date | 2004-03-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.0013-0133.2003.00202.x |
| OpenAlex | W2777306242 |
| Language | EN |
| References cited | 13 |
The views are not necessarily those of the Bank of England or Her Majesty’s Treasury. We would like to thank Charles Goodhart, Adrian Penalver, David Vines, and seminar participants at the Bank of England for comments. 2 In recent years, we appear to have entered an era of capital account crises. In response, a number of new crisis resolution ideas have been put forward, including the establishment of supranational institutions such as an international lender of last resort or an international bankruptcy court, temporary payments standstills and the inclusion of collective action clauses in debt contracts. This paper assesses these proposals using a theoretical model of crisis. The model underscores the importance of adapting policy interventions to the nature of the crisis at hand. For example, it finds that payments standstills and last-resort lending are an equally efficient means of dealing with liquidity crises, both ex-ante and ex-post, while creditor committees are second-best. It finds that debt-write-downs are a preferred means of dealing with solvency crises than subsidized IMF financing because of the negative moral hazard implications of the latter tool. And it finds that international bankruptcy court proposals may be superior to contractual approaches in securing such write-downs
Bankruptcy · Business · Creditor · Debt · Economics · Financial system · Incentive · Insolvency · Market economy · Market liquidity · Monetary economics · Moral hazard · Payment · Solvency · Work (physics · Finance · Global Financial Crisis and Policies
A Constant Recontracting Model of Sovereign Debt
Bank Runs, Deposit Insurance, and Liquidity
Sovereign Liquidity Crises
Co‐ordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures
On the Need for an International Lender of Last Resort
International Institutions for Reducing Global Financial Instability
| Highly cited | No |
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