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A Pigovian Approach to Liquidity Regulation

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Author Info

  • Enrico Perotti

    (University of Amsterdam, Duisenberg school of finance, and CEPR)

  • Javier Suarez

    (CEMFI, and CEPR)

Abstract

This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic risk externalities. It focuses on the relative

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-040/2/DSF15.

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Date of creation: 17 Feb 2011
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Handle: RePEc:dgr:uvatin:20110040

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Related research

Keywords: Systemic risk; Liquidity risk; Liquidity requirements; Liquidity risk levies; Macroprudential regulation;

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References

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  1. Rochet, Jean Charles & Vives, Xavier, 2002. "Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?," CEPR Discussion Papers 3233, C.E.P.R. Discussion Papers.
  2. Rocco Huang & Lev Ratnovski, 2010. "The dark side of bank wholesale funding," Working Paper Series 1223, European Central Bank.
  3. Segura, Anatoli & Suarez, Javier, 2011. "Liquidity shocks, roll-over risk and debt maturity," CEPR Discussion Papers 8324, C.E.P.R. Discussion Papers.
  4. Viral V. Acharya, 2010. "Measuring systemic risk," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 65-71.
  5. Franklin Allen & Ana Babus & Elena Carletti, 2010. "Financial Connections and Systemic Risk," Economics Working Papers ECO2010/30, European University Institute.
  6. Acharya, Viral V & Pedersen, Lasse H & Philippon, Thomas & Richardson, Matthew P, 2012. "Measuring Systemic Risk," CEPR Discussion Papers 8824, C.E.P.R. Discussion Papers.
  7. Wagner, Wolf, 2010. "Diversification at financial institutions and systemic crises," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 373-386, July.
  8. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises: The Good, the Bad, and the Ugly," IMF Working Papers 10/146, International Monetary Fund.
  9. Emmanuel Farhi & Jean Tirole, 2009. "Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts," NBER Working Papers 15138, National Bureau of Economic Research, Inc.
  10. Jeanne, O. Prof.Dr. & Korinek, A., 2010. "Managing Credit Booms and Busts: A Pigouvian Taxation Approach," Discussion Paper 2010-108S, Tilburg University, Center for Economic Research.
  11. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
  12. Markus K. Brunnermeier, 2008. "Deciphering the Liquidity and Credit Crunch 2007-08," NBER Working Papers 14612, National Bureau of Economic Research, Inc.
  13. Markus K. Brunnermeier & Martin Oehmke, 2010. "The Maturity Rat Race," NBER Working Papers 16607, National Bureau of Economic Research, Inc.
  14. Viral V. Acharya & Ouarda Merrouche, 2010. "Precautionary Hoarding of Liquidity and Inter-Bank Markets: Evidence from the Sub-prime Crisis," NBER Working Papers 16395, National Bureau of Economic Research, Inc.
  15. Louis Kaplow & Steven Shavell, 1997. "On the Superiority of Corrective Taxes to Quantity Regulation," NBER Working Papers 6251, National Bureau of Economic Research, Inc.
  16. Acharya, Viral V. & Gale, Douglas M & Yorulmazer, Tanju, 2009. "Rollover Risk and Market Freezes," CEPR Discussion Papers 7122, C.E.P.R. Discussion Papers.
  17. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
  18. Viral V. Acharya & S. Viswanathan, 2011. "Leverage, Moral Hazard, and Liquidity," Journal of Finance, American Finance Association, vol. 66(1), pages 99-138, 02.
  19. Guido Lorenzoni, 2008. "Inefficient Credit Booms," Review of Economic Studies, Wiley Blackwell, vol. 75(3), pages 809-833, 07.
  20. Anatoli Segura & Javier Suarez, 2011. "Dynamic Maturity Transforation," Working Papers wp2011_1105, CEMFI.
  21. Gary Gorton & Andrew Metrick, 2010. "Regulating the Shadow Banking System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(2 (Fall)), pages 261-312.
  22. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
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Citations

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Cited by:
  1. De Nicolò, Gianni & Gamba, Andrea & Luccetta, Marcella, 2012. "Capital regulation, liquidity requirements and taxation in a dynamic model of banking," Discussion Papers 10/2012, Deutsche Bundesbank, Research Centre.
  2. Enrico Perotti & Lev Ratnovski & Razvan Vlahu, 2011. "Capital Regulation and Tail Risk," DNB Working Papers 307, Netherlands Central Bank, Research Department.
  3. Giancarlo Corsetti & Michael P. Devereux & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2011. "Chapter 5: Taxation and Regulation of the Financial Sector," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 147-169, 02.
  4. Pierluigi Bologna, 2011. "Is There a Role for Funding in Explaining Recent U.S. Banks' Failures?," IMF Working Papers 11/180, International Monetary Fund.
  5. Viral V. Acharya & Lasse H. Pedersen & Thomas Philippon & Matthew Richardson, 2012. "How to Calculate Systemic Risk Surcharges," NBER Chapters, in: Quantifying Systemic Risk, pages 175-212 National Bureau of Economic Research, Inc.
  6. Anton Korinek, 2011. "The New Economics of Capital Controls Imposed for Prudential Reasons," IMF Working Papers 11/298, International Monetary Fund.
  7. Diana Bonfim & Moshe Kim, 2012. "Liquidity risk in banking: is there herding?," Working Papers w201218, Banco de Portugal, Economics and Research Department.
  8. Segura, Anatoli & Suarez, Javier, 2011. "Liquidity shocks, roll-over risk and debt maturity," CEPR Discussion Papers 8324, C.E.P.R. Discussion Papers.
  9. Felix Bierbrauer, 2012. "On the incidence of a financial transactions tax in a model with fire sales," Working Paper Series in Economics 55, University of Cologne, Department of Economics.
  10. Felix Bierbrauer, 2012. "On the Incidence of a Financial Transactions Tax in a Model with Fire Sales," CESifo Working Paper Series 3870, CESifo Group Munich.

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