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Anticipating individual bank rescues

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  • Correia, Ricardo
  • Dubiel-Teleszynski, Tomasz
  • Población, Javier

Abstract

We construct a structural model to determine the cost of a bank rescue. Moreover, our model can estimate the likelihood and timing of a bank rescue. With respect to bank characteristics, theoretical results in this paper show that a rescue is more likely when growth in cash flow is low, operational risk is high and costs are high. The empirical application of our model to an apparently homogeneous sample of countries generates reasonable estimates for the likelihood and costs of a bank rescue. However, our results also show that the optimal model specifications are independent of size, geographical proximity and cultural similarities.

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  • Correia, Ricardo & Dubiel-Teleszynski, Tomasz & Población, Javier, 2019. "Anticipating individual bank rescues," Economic Modelling, Elsevier, vol. 82(C), pages 345-360.
    • Handle: RePEc:eee:ecmode:v:82:y:2019:i:c:p:345-360
    DOI: 10.1016/j.econmod.2019.01.018
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    More about this item

    Keywords

    Structural model; Bank rescues; Bail-out; Bail-in;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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