Journal article
Jointly optimal regulation of bank capital and liquidity
- Abstract:
- In an economy with financial frictions, banks endogenously choose excessive leverage and maturity mismatch in equilibrium, as they fail to internalize the risk of socially wasteful fire sales. Macroprudential regulators can achieve efficiency with simple linear constraints, which require less information than Pigouvian taxes. The liquidity coverage and net stable funding ratios of Basel III can implement efficiency. Additional microprudential regulation of leverage is required when bank failures are socially costly. Micro- and macroprudential rules are imperfect substitutes. Optimally, macroprudential policy reacts to systematic risk and credit conditions over the cycle, while microprudential policy reacts to systematic and idiosyncratic risk.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
Actions
Access Document
- Files:
-
-
(Preview, Accepted manuscript, pdf, 466.9KB, Terms of use)
-
- Publisher copy:
- 10.1111/jmcb.12305
Authors
- Publisher:
- Wiley
- Journal:
- Journal of Money, Credit and Banking More from this journal
- Volume:
- 48
- Issue:
- 2-3
- Pages:
- 415-448
- Publication date:
- 2016-03-14
- Acceptance date:
- 2015-02-20
- DOI:
- EISSN:
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1538-4616
- ISSN:
-
0022-2879
- Language:
-
English
- Keywords:
- Pubs id:
-
1609782
- UUID:
-
uuid:93bfef8e-58b1-4101-9dfe-ddd8feb09e77
- Local pid:
-
pubs:1609782
- Deposit date:
-
2015-03-05
- ARK identifier:
Terms of use
- Copyright holder:
- Ohio State University
- Copyright date:
- 2018
- Rights statement:
- © 2016 The Ohio State University
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from Wiley at https://dx.doi.org/10.1111/jmcb.12305
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