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A Macroeconomic Model of Endogenous Systemic Risk Taking

Listed author(s):
  • Martinez-Miera, David
  • Suarez, Javier

We analyze banks' systemic risk taking in a simple dynamic general equilibrium model. Banks collect funds from savers and make loans to firms. Banks are owned by risk-neutral bankers who provide the equity needed to comply with capital requirements. Bankers decide their (unobservable) exposure to systemic shocks by trading off risk-shifting gains with the value of preserving their capital after a systemic shock. Capital requirements reduce credit and output in

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9134.

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Date of creation: Sep 2012
Handle: RePEc:cpr:ceprdp:9134
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