In this paper, we argue that the anticipation of bailouts creates incentives for banks to herd in the sense of making similar investments. This herding behavior makes bailouts more likely and potential crises more severe. Analyses of bailouts and moral hazard problems that focus exclusively on...

Policymakers concerned about rapid swings in commodity prices seek economic guidance about causal factors and future trends, but standard models—based on Harold Hotelling’s classic 1931 theory—are unable to explain actual data on price variability for a wide range of commodities. In this...