Limits to foreign lending would cut bail-out risks, Banque de France paper claims
Paper examines why countries bail each other out
Capital controls to stop investors in ‘core' countries lending into ‘peripheral' economies would limit the need for a bail-out, countering the ‘implicit guarantee' that encourages such risky lending, according to a new working paper published by the Banque de France.
In International bailouts: why did banks' collective bet lead Europe to rescue Greece?, Eric Mengus of the Toulouse School of Economics deploys a two-country model to investigate the incentives that lead one country to take charge
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