@article{Resolution:1624,
      recid = {1624},
      author = {Schroth, Josef},
      title = {Financial Crisis Resolution},
      address = {2012},
      pages = {1 online resource (iii, 22 pages)},
      abstract = {This paper studies a dynamic version of the  Holmstrom-Tirole model of intermediated finance. I show  that competitive equilibria are not constrained efficient  when the economy experiences a financial crisis. A  pecuniary externality entails that banks’ desire to  accumulate capital over time aggravates the scarcity of  informed capital during the financial crisis. I show that a  constrained social planner finds it beneficial to introduce  a permanent wedge between the deposit rate and the  economy’s marginal rate of transformation. The wedge  improves borrowers’ access to finance during a financial  crisis by strengthening banks’ incentives to provide  intermediation services. I propose a simple implementation  of the constrained-efficient allocation that limits bank  size.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/1624},
      doi = {https://doi.org/10.34989/swp-2012-42},
}