A Pigovian Approach to Liquidity Regulation

Arbeitspapier

This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic risk externalities. It focuses on the relativemerit of price versus quantity rules, showing how they target different incentives for risk creation.When banks differ in credit opportunities, a Pigovian tax on short-term funding is efficient in containing risk and preserving credit quality, while quantity-based fundingratios are distorsionary. Liquidity buffers are either fully ineffective or similar to a Pigovian tax with deadweight costs. Critically, they may be least binding when excess credit incentives are strongest.When banks differ instead mostly in gambling incentives (due to low charter valueor overconfidence), excess credit and liquidity risk are best controlled with net fundingratios. Taxes on short-term funding emerge again as efficient when capital or liquidityratios keep risk shifting incentives under control. In general, an optimal policy shouldinvolve both types of tools.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 11-040/2/DSF15

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Thema: Systemic risk ; Liquidity risk ; Liquidity requirements ; Liquidity risk levies ; Macroprudential regulation ; Kreditrisiko ; Systemrisiko ; Bankenliquidität ; Bankenregulierung ; Internalisierung externer Effekte ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Perotti, Enrico ; Suarez, Javier
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/86848
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ