Bank Regulation under Fire Sale Externalities
نویسندگان
چکیده
منابع مشابه
Bank Regulation under Fire Sale Externalities
We examine the optimal design of and interaction between capital and liquidity regulations. Banks, not internalizing fire sale externalities, overinvest in risky assets and underinvest in liquid assets in the competitive equilibrium. Capital requirements can alleviate the inefficiency, but banks respond by decreasing their liquidity ratios. When capital requirements are the only available tool,...
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This paper examines the optimal design of capital and liquidity regulations under fire sale externalities. The lack of complementary liquidity ratio requirements harms the purpose of capital adequacy requirements by yielding not only inefficiently low risky investment but also more severe financial crises. When capital is regulated but liquidity is not, banks still keep liquid assets for micro-...
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ژورنال
عنوان ژورنال: The Review of Financial Studies
سال: 2019
ISSN: 0893-9454,1465-7368
DOI: 10.1093/rfs/hhz117