City Research Online

Abstract

The degree to which governments intervene to contain financial crises varies considerably. We aim to understand why policymakers choose the level of intervention they do to contain financial shocks. In particular, we want to understand why policymakers may choose policies that create outcomes they do not want. We focus on a defining feature of financial crisis policymaking that has been largely unaddressed in the literature on policy responses to crises: policymakers lack good information about the health of their banking systems. So, they rely on their bureaucrats and other actors for necessary information. However, information providers may have different policy preferences. To understand the interactions between these actors and the implications for policy choice, we advance a signalling game of financial crisis containment. We use comparative statics and a case study of the recent Irish crisis to demonstrate how information asymmetries can have a significant impact on bailout choices.

Publication Type:	Article
Additional Information:	This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of European Public Policy and to be available online at http://www.tandfonline.com/doi/abs/10.1080/13501763.2016.1149205
Publisher Keywords:	banking crisis, financial crisis policymaking, guarantees, Ireland, signalling games
Subjects:	H Social Sciences > HG Finance
Departments:	School of Policy & Global Affairs > International Politics
SWORD Depositor:	Symplectic Administrator

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