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The effect of bank bail-outs in the EU

Author

Listed:
  • Barucci, Emilio
  • Colozza, Tommaso
  • Milani, Carlo

Abstract

The financial crisis renewed the debate on the bail-out of financial institutions, questioning the effectiveness of such an intervention in restoring normal economic conditions. This paper analyzes the effect on the real economy of State financial support to distressed banks, using a panel approach that covers all countries in the EU throughout the financial crisis. Results show that State financial support was able to enhance economic conditions by restoring trust in financial markets. State support boosted the ongoing substitution between securities and bank lending as the main financing channel of non-financial firms.

Suggested Citation

  • Barucci, Emilio & Colozza, Tommaso & Milani, Carlo, 2019. "The effect of bank bail-outs in the EU," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 14-26.
    • Handle: RePEc:eee:jimfin:v:95:y:2019:i:c:p:14-26
    DOI: 10.1016/j.jimonfin.2019.03.004
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    Citations

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    Cited by:

    1. Manuel Monjas & María Rocamora & Nuria Suárez, 2023. "Determinants of bail-in debt yields in the EU banking sector: a multi-country approach with idiosyncratic factors," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(4), pages 1055-1095, November.
    2. Gao, Jieqiong & Ghosh, Chinmoy, 2024. "The longer-term impact of TARP on banks’ default risk," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 346-357.
    3. Andrea Modena, 2020. "Recapitalization, Bailout, and Long-run Welfare in a Dynamic Model of Banking," Working Papers 2020:23, Department of Economics, University of Venice "Ca' Foscari".
    4. Andrzej R. Stopczyński, 2020. "Banki na progu upadłości – refleksje nad postępowaniem," Bank i Kredyt, Narodowy Bank Polski, vol. 51(5), pages 517-548.

    More about this item

    Keywords

    State financial support; Bail-out; Economic growth; Financial stability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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