A global game analysis of the LLR: the role of creditors' behaviour and penalty rate lending
by Junnosuke Shino
International Journal of Monetary Economics and Finance (IJMEF), Vol. 8, No. 4, 2015

Abstract: We construct a global-game LLR model in which the policy maker to provide LLR is an explicit player that cannot distinguish solvent from insolvent banks ex ante. We first show that creditors' aggregate behaviour to withdraw their funds operates as a signal to the policy maker about banks' solvency. Then it is shown that the policy maker optimally helps only illiquid but solvent banks and the lending rates are strictly positive whenever LLR is utilised. The rates can be seen as 'conditionally punitive' in the sense that they take the highest level under the restriction that the solvent borrowers survive.

Online publication date: Fri, 27-Nov-2015

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Monetary Economics and Finance (IJMEF):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?


Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com