Optimal bank bailout policy and merger control in an uncertain economic environment
25 September 2017
University of Antwerp, Promotiezaal Grauwzusters - Lange Sint-Annastraat 7 - 2000 Antwerp (route: UAntwerpen, Stadscampus
Prof Jan Bouckaert
Prof Peter Kort
PhD defence Glen Vermeulen - Faculty of Applied Economics
This thesis introduces uncertainty considerations in the policy areas of bank bailout and merger control.
- Chapter 1 formulates a real options consistent bailout decision rule that determines under which conditions it is optimal for a government to engage in emergency liquidity support, bank bailout and/or liquidation. The rule accounts for the uncertain economic environment surrounding bank crises and is used to evaluate the quality of EU-15 bank bailout policy in the crisis year of 2008.
- Chapter 2 builds upon the ideas presented in chapter 1 and develops a real options framework w.r.t. capacity choice that not only determines whether and when a bailout should take place, but also indicates what the size of the optimal rescue package should be. This forms one of the first attempts at determining optimal bank bailout size, given the uncertain environment.
- Chapter 3 finally introduces the value of flexibility associated with waiting for more information in the analysis of the choice for either a reversible behavioral or an irreversible structural merger remedy. The analysis shows that this value may well offset the increased requirements of the behavioral remedy type inherent to a consumer surplus standard, thus promoting a wider use of this merger remedy format.