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Macroprudential policies from a microprudential angle: A note

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  • Cordella, Tito
  • Pienknagura, Samuel

Abstract

The standard macroprudential 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 macroprudential stance.

Suggested Citation

  • Cordella, Tito & Pienknagura, Samuel, 2020. "Macroprudential policies from a microprudential angle: A note," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    • Handle: RePEc:eee:lajcba:v:1:y:2020:i:1:s2666143820300053
    DOI: 10.1016/j.latcb.2020.100005
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroprudential regulation; Microprudential regulation; Bank risk-taking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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