This paper presents a model of bank risk taking and government guarantees. Levered banks take excessive risk, as their actions are not fully priced at the margin by debt holders. The impact of government guarantees on bank risk taking depends critically on the portion of bank investors that can observe bank behavior and hence price debt at the margin. Greater guarantees increase risk taking (moral hazard) when informed investors hold a sufficiently...
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2017/02/15
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Documento de trabalho sobre pesquisa de políticas
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WPS7971
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1
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1
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2017/02/15
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Disclosed
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Government guarantees, transparency, and bank risk-taking
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bank risk-taking
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