Suppose you have these finding from Reinhart and Rogoff (AER: 2009) showing that a banking crisis on average causes:
a. Unemployment to rise for 4.8 years, with an increase in the unemployment rate of about 7 percentage point.
b. Real GDP to decline for 1.9 years, with a decline in real GDP of about 9.3 percent.
c. Cumulative public debt to rise 186.3 percent in the three years following the crisis.
a. What is the probability (P) you are willing to assign that not bailing-out Bank Century will not lead to a banking crisis?
b. Multiply P with either a, b, or, c finding above-mentioned. Do you still let Bank Century collapse? Of course you can put the cost of moral-hazard into your equation.
Submit your answer to those Indonesian lawmakers in that special committee before they get confused.