Review of the Theories of Financial Crises
Acharya, Viral, and Tanju Yorulmazer, 2007, Too many to fail—An analysis of time-inconsistency in bank closure policies, Journal of Financial Intermediation 16, 1-31
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References
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TABLE 2
Project outcomes in a model of moral hazard in the credit market: The table is based on Holmstrom and Tirole (1997). An entrepreneur can choose among three projects. The good project yields no private benefits and succeeds (i.e., yields R) with probability  (otherwise, it fails and yields 0). There are two bad projects that succeed with probability  . They differ in the amount of private benefits they generate to the entrepreneur which can be either b or B.
Bank Run Multiple Equilibria No Bank Run Figure 1: Bank runs with common knowledge: tripartite classification of the fundamentals (from Goldstein (2012), based on Morris and Shin (1998) and Goldstein and Pauzner (2005)).
Fundamentals-Based Bank Run Panic-Based Bank Run No Bank Run 
Figure 2: Equilibrium outcomes in a bank-run model with non-common knowledge (from Goldstein (2012), based on Morris and Shin (1998) and Goldstein and Pauzner (2005)). 
Figure 3: Direct and Indirect Financing of Investment (from Holmstrom and Tirole (1997)). 
Figure 4: Currency-Regime Switch (based on Krugman (1979) and Flood and Garber (1984)). 1 University of Pennsylvania - The Wharton School - Finance Department , The Wharton School, 3620 Locust Walk, Philadelphia, PA 19104, United States. Email: itayg@wharton.upenn.edu. 2 Cornell University, Uris Hall, 4th Floor, Ithaca, NY 14853, United States. Email: ar256@cornell.edu. 3 Many authors provide detailed descriptions of the events of the last few years. For example, see Brunnermeier (2009) and Gorton (2010). 4 Another important paper on the topic from that period is Bryant (1980). 5 Note that any von Neumann-Morgenstern utility function, which is well defined at 0 (i.e., ), can be transformed into an equivalent utility function that satisfies u(0)=0. 6 This property is referred to as “Global Strategic Complementarities”. 7 This upper dominance region is obtained with an additional assumption introduced by Goldstein and Pauzner (2005). 8 This sharp outcome is obtained when the noise in the signal approaches zero. For larger noise, the transition from run to no-run will not be so abrupt, but rather there will be a range of partial run. This does not matter for the qualitative message of the theory. 9 Strictly speaking, this intuition holds for the traditional global-games framework where global strategic complementarities hold. The intuition in the bank-run model of Goldstein and Pauzner (2005) is more involved. 10 An alternative line of models describes banking crises as a result of bad fundamentals only. See, for example, Jacklin and Bhattacharya (1988), Chari and Jagannathan (1988) and Allen and Gale (1998). 11 See Goldstein (2012) for a review of the empirical literature and a discussion of strategies to identify strategic complementarities. 12 Cooper and Ross (1998) study the relation between the banking contract and the probability of bank runs in a model where the probability of bank runs is exogenous. 13 Note that the lower threshold below which running is a dominant strategy is also an increasing function of  .
14 Note that the Goldstein-Pauzner model only focuses on demand deposit contracts to ask whether they improve welfare and how much risk sharing they should provide. Outside the global-games framework, there are papers that study a wider variety of contracts, e.g., Green and Lin (2003), Peck and Shell (2003), and Ennis and Keister (2009). Models by Calomiris and Kahn (1991) and Diamond and Rajan (2001) provide justification for the demand deposit contract based on the need to monitor bank managers. 15 Strictly speaking, the financial intermediaries here are not necessarily intermediating between the outside investors and the entrepreneurs, but rather could be providing a different type of financing that can relax financial constraints via monitoring. 16 For a survey of this literature, see: Brunnermeier, Eisenbach, and Sannikov (2012). 17 The model by Krugman (1979) builds on an earlier paper by Salant and Henderson (1977) about a speculative attack on gold reserves. 18 Note that self-fulfilling speculative attacks can arise naturally from a first-generation model as demonstrated by Obstfeld (1986). Hence, this is not the distinguishing feature of the second-generation models. Rather, the optimizing government is the distinguishing feature of the second-generation models. 19 For a broad review of the global–games methodology and its various applications, see Morris and Shin (2003). There is also a large literature that followed the original developments, analyzing conditions under which the unique-equilibrium result fails to hold. See, e.g., Angeletos and Werning (2006) and Hellwig, Mukherji, and Tsyvinski (2006). 20 For a broad description of the events around the Asian Crisis and the importance of capital flows in conjunction with the collapse of the exchange rate see Radelet and Sachs (1998) and Calvo (1998). 21 For empirical evidence on the twin crises, see Kaminsky and Reinhart (1999). 22 For a broader review, see the collection of articles in Claessens and Forbes (2001). Yüklə 240,72 Kb. Dostları ilə paylaş:
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is the probability it will be successful.
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