Ambiguity, Efficieny and Bank Bailouts

The paper examines the effects of ambiguity in regulation on the equilibrium allocation. Under ambiguous bailout policy, agents’ suffer from a lack of information with regards to the insolvency resolution method, which would be chosen by the regulator if a financial institution fails. In this case, beliefs of bankers regarding whether an insolvent bank is liquidated, may differ from those of depositors. The beliefs may be asymmetric even if bankers and depositors possess absolutely symmetric information about the policy of the regulator. It is shown that such asymmetry in beliefs can generate an allocative inefficiency of the bank based economy.bank bailouts; constructive ambiguity; decision-making, uncertainty

Bank Insolvencies, Regulatory Forbearance and Ambiguity

Banking regulators often practice forbearance and ambiguity in insolvency resolutions. The paper examines the effects of regulatory forbearance and ambiguity in a context of allocational efficiency. Bailouts, liquidations and their stochastic policy mix lead to suboptimal allocations if banks do not internalize insolvency costs. The policy of forbearance may make banks internalizing such costs and improves the efficiency of intermediation.Banks, insolvency resolution, forbearance, constructive ambiguity

Macroeconomic Evolution after a Production Shock: the Role for Financial Intermediation

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and bank-based financial systems in processing the shock. Unregulated banking system may collapse in absence of a proper regulation. The paper studies several types of regulatory interventions, which may improve the performance of the banking system.Financial intermediation, overlapping generations, general equilibrium, intertemporal smoothing

Ambiguity, Efficieny and Bank Bailouts

The paper examines the effects of ambiguity in regulation on the equilibrium allocation. Under ambiguous bailout policy, agents’ suffer from a lack of information with regards to the insolvency resolution method, which would be chosen by the regulator if a financial institution fails. In this case, beliefs of bankers regarding whether an insolvent bank is liquidated, may differ from those of depositors. The beliefs may be asymmetric even if bankers and depositors possess absolutely symmetric information about the policy of the regulator. It is shown that such asymmetry in beliefs can generate an allocative inefficiency of the bank based economy

Macroeconomic Evolution after a Production Shock: the Role for Financial Intermediation

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and bank-based financial systems in processing the shock. Unregulated banking system may collapse in absence of a proper regulation. The paper studies several types of regulatory interventions, which may improve the performance of the banking system

Bank Insolvencies, Regulatory Forbearance and Ambiguity

Banking regulators often practice forbearance and ambiguity in insolvency resolutions. The paper examines the effects of regulatory forbearance and ambiguity in a context of allocational efficiency. Bailouts, liquidations and their stochastic policy mix lead to suboptimal allocations if banks do not internalize insolvency costs. The policy of forbearance may make banks internalizing such costs and improves the efficiency of intermediation

Financial Markets, Financial Intermediation, and Bailout Policy

The 1980s and 1990s have been marked with a series of financial and banking crises all over the world. This turned the attention of economists to such questions as how a financial system should be structured in order to reduce the vulnerability of an economy to the risk of a crisis, or what policy should regulators follow in order to prevent the crises, and what regulatory measures would help in reduction of harmful effects of the crises? This dissertation studies relative advantages of a bank-based financial system against a market-based one. Instead of considering the role of financial intermediaries and financial markets in promoting economic growth, the work focuses on their ability to handle a crisis situation and to provide the optimal allocation of resources. The design of the bailout policy plays an important role in this issue, therefore the analysis begins with a microeconomic discussion of insolvency resolutions and then proceeds to a macroeconomic discussion of an optimal crisis management. The analysis here addresses such issues as constructive ambiguity and forbearance in the bailout policy of banking regulators. In particular, it is shown that ambiguity may be harmful for the economy, since asymmetric beliefs of the public may lead to suboptimal allocation of resources. On the contrary, forbearance may have a positive effect, since it makes intermediaries internalizing the costs of insolvency. In a dynamic context, banking system is more vulnerable to macroeconomic shocks, since it transfers and magnifies the impact of the shock into future periods through borrowing from future generations, which in financial markets is impossible. However, a properly regulated banking system exhibits the property of intertemporal shock smoothing, whereas financial markets concentrate the burden of the shock in one period. The dissertation concludes with a discussion of several banking crises, including the Russian crisis in 1998, the Japanese crisis of 1990-s, and the Swedish crisis of the beginning of 1990-s

Central Bank Announcements: Big News for Little People?

Little is known on how and whether central bank announcements affect consumers' beliefs about policy relevant economic figures. This paper focuses on consumers' perceptions and expectations of inflation and interest rates and confidence therein. Based on a sound identification (running surveys shortly before and after communication events), and relying on above 15 000 observations, spanning over 12 FOMC press conferences between December 2015 and June 2018, we document the impact of the central bank communication on ordinary people. While announcement events have little measurable direct effect on average beliefs, they make people more likely to receive news about the central bank's policy. In general, informed consumers tend to have lower perceptions and expectations, higher confidence and, to an extent, better quality beliefs

Measurement of the inclusive isolated-photon cross section in pp collisions at √s = 13 TeV using 36 fb−1 of ATLAS data

The differential cross section for isolated-photon production in pp collisions is measured at a centre-of-mass energy of 13 TeV with the ATLAS detector at the LHC using an integrated luminosity of 36.1 fb. The differential cross section is presented as a function of the photon transverse energy in different regions of photon pseudorapidity. The differential cross section as a function of the absolute value of the photon pseudorapidity is also presented in different regions of photon transverse energy. Next-to-leading-order QCD calculations from Jetphox and Sherpa as well as next-to-next-to-leading-order QCD calculations from Nnlojet are compared with the measurement, using several parameterisations of the proton parton distribution functions. The predictions provide a good description of the data within the experimental and theoretical uncertainties. [Figure not available: see fulltext.