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Macro prudential policies from a micro prudential angle

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  • Cordella, Tito
  • Pienknagura, Samuel

Abstract

The standard macro(prudential) models focus on externalities and treat all prudential instruments as alternative, but equivalent, forms of Pigouvian taxes. This paper explicitly models individual banks'risk choices and shows that different prudential instruments affect banks'risk-taking incentives differently. Thus, conflicts may arise between the micro and macro prudential stance.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6721.

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Date of creation: 01 Dec 2013
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Handle: RePEc:wbk:wbrwps:6721

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Related research

Keywords: Banks&Banking Reform; Debt Markets; Economic Theory&Research; Financial Intermediation; Deposit Insurance;

References

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  1. Olivier Jeanne & Anton Korinek, 2010. "Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach," American Economic Review, American Economic Association, vol. 100(2), pages 403-07, May.
  2. Gianni De Nicoló & Andrea Gamba & Marcella Lucchetta, 2012. "Capital Regulation, Liquidity Requirements and Taxation in a Dynamic Model of Banking," IMF Working Papers 12/72, International Monetary Fund.
  3. Javier Bianchi, 2009. "Overborrowing and systemic externalities in the business cycle," Working Paper 2009-24, Federal Reserve Bank of Atlanta.
  4. Xavier Freixas & Jean-Charles Rochet, 2008. "Microeconomics of Banking, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062704, December.
  5. Cordella, Tito & Yeyati, Eduardo Levy, 2003. "Bank bailouts: moral hazard vs. value effect," Journal of Financial Intermediation, Elsevier, vol. 12(4), pages 300-330, October.
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Cited by:
  1. de la Torre, Augusto & Ize, Alain, 2013. "The foundations of macroprudential regulation : a conceptual roadmap," Policy Research Working Paper Series 6575, The World Bank.
  2. Cordella, Tito & Federico, Pablo & Vegh, Carlos & Vuletin, Guillermo, 2014. "Reserve requirements in the brave new macroprudential world," Policy Research Working Paper Series 6793, The World Bank.

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