International Financial Crises and Public Policy: Some Welfare Analysis

9 Pages Posted: 3 Aug 2005

See all articles by Michael K.F. Chui

Michael K.F. Chui

Bank for International Settlements (BIS)

Prasanna Gai

University of Auckland Business School; Australian National University (ANU); Bank of England

Andrew Haldane

Bank of England

Abstract

This article describes a model of financial crisis and explores its implications for public policy. The framework nests the key features of earlier models but is better able to address international architecture questions in a welfare setting. In particular, this framework is used to assess the welfare costs of creditor coordination failure and several recent public policy proposals on reforming the international financial architecture. The costs of creditor coordination failures are found to be high. But policies that improve sovereign liquidity management or that stall creditor runs - such as payments standstills - can mitigate these costs.

Suggested Citation

Chui, Michael K.F. and Gai, Prasanna and Haldane, Andrew, International Financial Crises and Public Policy: Some Welfare Analysis. Bank of England Quarterly Bulletin, November 2000, Available at SSRN: https://ssrn.com/abstract=764425

Michael K.F. Chui

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Prasanna Gai

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom
+020 7601 3583 (Phone)

Andrew Haldane (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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