Alissa M. Kleinnijenhuis is visiting the Imperial College Business School (Finance group) this Spring. She has been a Research Scholar at the Stanford Institute of Economic Policy Research (SIEPR) at Stanford University. She is Research Associate at the Institute for New Economic Thinking (INET) at the Oxford Martin School of the University of Oxford, and a Non-Resident Fellow at Bruegel. Alissa is a Co-PI of a Market Ecology, Climate Finance & Financial Stability Grant, supervising four Ph.D. students, and
Could bail-in resolve the too big to fail problem? To answer this, we study systemic implications of the bail-in design, capturing the financial system’s networked nature. Our hypothesis that bail-ins are not credible in systemic crises but are credible for idiosyncratic bank failure is partially rejected. We find that the credibility of bail-in hinges on the bail-in design. A well-designed bail-in maintains stability even in severe systemic crises, whereas an ill-designed one exacerbates distress, also whe
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