Drivers of fiscal outlays in banks recapitalizations

 · Fiscal_Cost: Gross fiscal outlays related to the restructuring of the financial sector during the most recent financial crisis for each country, as % of GDP. They include fiscal costs associated with bank recapitalizations but exclude asset purchases and direct liquidity assistance from the Treasury. banks post fewer losses and are able to lend more at lower rates, further raising current dispos-able income for borrowers. The government can also intervene directly in the financial sector. Bank recapitalizations directly facilitate the expansion of bank intermediation, by relaxing their constraints and moderating the financial accelerator.  · “Fiscal outlays are not the only economic costs of bank collapses,” note Honohan and Klingebiel. “The losses covered [by taxpayers] .

(), on the other hand, find that policies that increased fiscal outlays were associated with lower real GDP growth during a crisis. Klingebiel et al. () assess stock market responses to bank restructuring policies and find that public interventions in banks are largely ineffective. Fiscal outlays are not the only dimension in which banking collapses impose costs on the economy. Indeed, to the extent that bailing-out depositors amounts to a transfer from taxpayers to depositors, this is not a net economic cost at all. But, when a government makes the bank's claimants whole, its net costs tend to be correlated with the. Consistent with the greater reliance on macroeconomic policies in advanced economies, we find that fiscal outlays associated with financial sector interventions (including bank recapitalization with public funds) in advanced economies are about half those in emerging and developing economies, despite relatively larger banking systems in advanced economies.

Transfers and bank recapitalizations yielded the largest fiscal “Obama stimulus”) consisted of outlays equivalent to % of GDP at its peak. Its rescue package from the ESM was earmarked for a bank recapitalisation fund and did not include financial support for the government itself. reflect the current drivers of economic growth and take advantage of the bank recapitalisation and expansion of existing loan and credit guarantee.