THE MACROECONOMIC CONSEQUENCES OF THE SAVINGS-AND-LOAN DEBACLE

This paper used a general equilibrium framework to examine the macroec onomic consequences of the recent failures and subsequent bailout in t he savings and loan industry. We distinguish between the losses in the capital stock, the economic effects of alternative methods of funding those real losses, and the intertemporal transfer of real resources i mplicit in backing the financial assets used. We then embed the analys is in a general equilibrium, multi-country model with intertemporal bu dget constraints that allows for the interaction of intertemporal adju stment and expectation revision. The more complete model is used to ex plore the consequences of the S&L debacle on the evolution of the U.S. economy during the 1980's and 1990s.