Gersbach, Hans and Rochet, Jean-Charles
(2017)
Capital regulation and credit fluctuations.
Journal of Monetary Economics, vol. 90.
pp. 113-124.
Abstract
Credit cycle stabilization can be a rationale for imposing counter-cyclical capital requirements on banks. The model comprises two productive sectors: in one sector, firms can finance investments through a bond market. In the other, firms rely on bank credit. Financial frictions limit banks’ borrowing capacity. Aggregate shocks impact firms’ productivity. From a welfare perspective, banks lend too much in high productivity states and too little in bad states, although financial markets are complete. Imposing a (stricter) capital requirement in good states corrects capital misallocation, increases expected output and social welfare. Even with risk-neutral agents, stabilization of credit cycles is socially beneficial.
Item Type: | Article |
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Language: | English |
Date: | 2017 |
Refereed: | Yes |
Uncontrolled Keywords: | Credit fluctuations, Macroprudential regulation, Sectoral misallocation of capital |
JEL Classification: | D86 - Economics of Contract - Theory G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G28 - Government Policy and Regulation |
Subjects: | B- ECONOMIE ET FINANCE |
Divisions: | TSE-R (Toulouse) |
Site: | UT1 |
Date Deposited: | 13 Apr 2018 14:58 |
Last Modified: | 01 Jul 2021 07:53 |
OAI Identifier: | oai:tse-fr.eu:32469 |
URI: | https://publications.ut-capitole.fr/id/eprint/25850 |