IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Macroprudential Regulation Versus Mopping Up After the Crash

  • Anton Korinek

    (Johns Hopkins University and IMF)

  • Olivier Jeanne

    (John Hopkins University)

This paper compares ex-ante policy measures (such as macroprudential regulation) and ex-post policy interventions (such as bailouts) to respond to financial crises in models of financial amplification, i.e. models in which falling asset prices, declining net worth and tightening financial constraints reinforce each other. The optimal policy mix in such models involves a combination of both types of measures since they offer alternative ways of mitigating binding financial constraints. Comparing their relative merits, ex-post policy interventions are only taken once a crisis has materialized and are therefore better targeted, whereas ex-ante measures are blunter since they depend on crisis expectations. However, ex-post interventions distort incentives and create moral hazard. This introduces a time consistency problem, which can in turn be solved by ex-ante policy measures. Limiting ex-post transfers to the revenue accumulated in a bailout fund reduces welfare.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 405.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:red:sed013:405
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Korinek, Anton, 2011. "Systemic risk-taking: amplification effects, externalities, and regulatory responses," Working Paper Series 1345, European Central Bank.
  2. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
  3. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "A corporate balance-sheet approach to currency crises," Journal of Economic Theory, Elsevier, vol. 119(1), pages 6-30, November.
  4. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  5. Javier Bianchi, 2012. "Efficient Bailouts?," Documentos de Trabajo (working papers) 2012, Department of Economics - dECON.
  6. Anton Korinek & Jonathan Kreamer, 2013. "The Redistributive Effects of Financial Deregulation," NBER Working Papers 19572, National Bureau of Economic Research, Inc.
  7. Jeanne, O. & Korinek, A., 2010. "Managing Credit Booms and Busts : A Pigouvian Taxation Approach," Discussion Paper 2010-108S, Tilburg University, Center for Economic Research.
  8. Javier Bianchi, 2011. "Overborrowing and Systemic Externalities in the Business Cycle," American Economic Review, American Economic Association, vol. 101(7), pages 3400-3426, December.
  9. Guido Lorenzoni, 2008. "Inefficient Credit Booms," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 809-833.
  10. Javier Bianchi & Enrique G. Mendoza, 2010. "Overborrowing, Financial Crises and 'Macro-prudential' Taxes," NBER Working Papers 16091, National Bureau of Economic Research, Inc.
  11. Huigang Chen & Eric Young & Christopher Otrok & Alessandro Rebucci & Gianluca Benigno, 2013. "Optimal Policy for Macro-Financial Stability," 2013 Meeting Papers 636, Society for Economic Dynamics.
  12. Enrico Perotti & Javier Suarez, 2011. "A Pigovian Approach to Liquidity Regulation," Tinbergen Institute Discussion Papers 11-040/2/DSF15, Tinbergen Institute.
  13. Olivier Jeanne & Anton Korinek, 2010. "Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach," NBER Working Papers 15927, National Bureau of Economic Research, Inc.
  14. Viral Acharya & Tanju Yorulmazer, 2007. "Cash-in-the-market pricing and optimal resolution of bank failures," Bank of England working papers 328, Bank of England.
  15. Ryo Kato & Takayuki Tsuruga, 2011. "Bank Overleverage and Macroeconomic Fragility," IMES Discussion Paper Series 11-E-15, Institute for Monetary and Economic Studies, Bank of Japan.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed013:405. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.