Discussion of an integrated framework for multiple financial regulations

Arbeitspapier

A 2012 paper by Goodhart, Kashyap, Tsomocos, and Vardoulakis (GKTV) proposes a dynamic general equilibrium framework that provides a conceptual - and to some extent quantitative - framework for the analysis of macroprudential policies. The distinguishing feature of GKTV's paper relative to any other on macroprudential policy is its study of a setting with multiple financial frictions that permits the analysis of multiple macroprudential policy tools at the same time. The modeling approach includes various market failures such as incomplete markets with heterogeneous agents, fire-sale externalities, and margin spirals, all of which provide rationales for policies designed to improve welfare. In GKTV's model, liquidity ratios are found to be more efficient preemptive tools than capital ratios or loan-to-value ratios. However, these liquidity ratios need to be relaxed in times of crises in order to reduce adverse effects from fire-sale externalities. It remains to be seen how robust these findings are in alternative, fully dynamic settings. Furthermore, GKTV's approach does not address the tension between micro- and macroprudential objectives, and the timing of the buildup and release of policies is not specified precisely.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 583

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: Government Policy and Regulation ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: macroprudential policy ; microprudential policy ; procyclicality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Adrian, Tobias
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/93674
• Last update: 10.03.2025, 11:43 AM CET