Arbeitspapier
Macro-prudential policies, moral hazard and financial fragility
This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this happening depends on the bank management efforts to keep the bank financially sound and the degree of bank leverage. We study the properties of this model under different monetary and macro-prudential policy arrangements. Our model is able to replicate the pro-cyclicality of leverage, and provides insights on the interplay between bank leverage and bank management incentives as a result of monetary, productivity and financial shocks. We find that a combination of pro-cyclical capital requirements and a standard monetary policy are well suited to contain the effects on output and prices of a downturn, keeping the financial system in check. Yet, in an expansionary phase (i.e. a productivity shock) this policy combination may produce desirable results for some macro-variables but at the expense of a deterioration in other macro-financial indicators.
- Sprache
-
Englisch
- Erschienen in
-
Series: Graduate Institute of International and Development Studies Working Paper ; No. HEIDWP06-2015
- Klassifikation
-
Wirtschaft
Portfolio Choice; Investment Decisions
Technological Change: Choices and Consequences; Diffusion Processes
Economics of Contract: Theory
- Thema
-
DSGE modeling
financial frictions
moral hazard
macro-prudential policies
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Arango, Carlos A.
Valencia, Oscar M.
- Ereignis
-
Veröffentlichung
- (wer)
-
Graduate Institute of International and Development Studies
- (wo)
-
Geneva
- (wann)
-
2015
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Arango, Carlos A.
- Valencia, Oscar M.
- Graduate Institute of International and Development Studies
Entstanden
- 2015
Ähnliche Objekte (12)
Allocating macro-prudential powers
Macro-Prudential Policy: An Assessment
Financial Crises and Macro-Prudential Policies
Financial Innovation: Macro-economic and Macro-prudential Consequences
Financial Innovation: Macro-economic and Macro-prudential Consequences
Central Bank involvement in macro-prudential oversight
Rollover risk, liquidity, and macro-prudential regulation
Macro-prudential policies and financial cycle in Iran
The risk management approach to macro-prudential policy
On the origins of the BIS macro-prudential approach to financial stability: Alexandre Lamfalussy and financial fragility
Analysing banking sector conditions : how to use macro-prudential indicators
Benefits of macro-prudential policy in low interest rate environments
Allocating macro-prudential powers
Macro-Prudential Policy: An Assessment
Financial Crises and Macro-Prudential Policies
Financial Innovation: Macro-economic and Macro-prudential Consequences
Financial Innovation: Macro-economic and Macro-prudential Consequences
Central Bank involvement in macro-prudential oversight
Rollover risk, liquidity, and macro-prudential regulation
Macro-prudential policies and financial cycle in Iran
The risk management approach to macro-prudential policy
On the origins of the BIS macro-prudential approach to financial stability: Alexandre Lamfalussy and financial fragility
Analysing banking sector conditions : how to use macro-prudential indicators
Benefits of macro-prudential policy in low interest rate environments
Allocating macro-prudential powers
Macro-Prudential Policy: An Assessment
Financial Crises and Macro-Prudential Policies
Financial Innovation: Macro-economic and Macro-prudential Consequences
Financial Innovation: Macro-economic and Macro-prudential Consequences
Central Bank involvement in macro-prudential oversight
Rollover risk, liquidity, and macro-prudential regulation
Macro-prudential policies and financial cycle in Iran
The risk management approach to macro-prudential policy
On the origins of the BIS macro-prudential approach to financial stability: Alexandre Lamfalussy and financial fragility
Analysing banking sector conditions : how to use macro-prudential indicators