In this paper we study dollarization as a commitment device that the Central Bank could use to avoid getting involved in an undesirable banking-sector bailout. We show how a political process could induce an equilibrium outcome that differs from the one that a benevolent Central Bank would want...

Some U.S. banks may be perceived as too big to fail: If any such bank were to get into trouble, the market may expect a government bailout. In general, the possibility of contingent bailouts creates a risk and a size distortion in the decisions of banks. As a result, banks tend to become riskier...

In the last thirty years the U.S. commercial banking industry has experienced significant changes. Characterizing this transformation are long-run trends of the structure, balance sheet, and income statement of the industry. A review of these trends reveals that banks are still very important...

Important changes in U.S. banking regulation that took place during the nineties have inspired concern about the long-run size distribution of banks. The asset-size distribution of commercial banks is skewed to the right, and there has been a pronounced increase in asset concentration in the...