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Bank regulation and supervision and its welfare implications

  • Kilinc, Mustafa
  • Neyapti, Bilin

This study provides a general equilibrium model to explore the welfare implications of bank regulation and supervision (RS). The model supports the basic expectations regarding the positive effects of RS on the growth rate, output, credit, investment, wages and profits; and its negative effects on the interest rate. In addition, RS is observed to lead to a convergence effect. Furthermore, it is observed that the decision of banks to monitor and charge differentiated interest rates to firms depends on the distribution of firm-specific moral hazard rates; bank monitoring increases profits as the distribution of producer type improves.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 132-141

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:132-141
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. TCHANA TCHANA, Fulbert, 2007. "The Welfare Cost of Banking Regulation," MPRA Paper 7588, University Library of Munich, Germany.
  2. Greenwood, Jeremy & Jovanovic, Boyan, 1988. "Financial Development, Growth, And The Distribution Of Income," Working Papers 88-12, C.V. Starr Center for Applied Economics, New York University.
  3. Rafael Repullo & Javier Suarez, 1999. "Entrepreneurial moral hazard and bank monitoring: a model of the credit channel," Discussion Paper / Institute for Empirical Macroeconomics 129, Federal Reserve Bank of Minneapolis.
  4. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
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