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Essays in financial stability and public policy

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  • Horváth, Bálint

    (Tilburg University, School of Economics and Management)

Abstract

This dissertation is a collection of essays in two areas of financial stability. The first part deals with systemic risk in the banking sector. First, it asks whether countercyclical macroprudential policy tools can be an effective way of reducing cyclicality in bank lending. The main finding is that these policies can be counterproductive and may incentivize more intertwined banks, and hence, endanger financial stability. The next paper investigates, and provides some evidence of, the possibility that banks actively change their portfolios in order to influence the likelihood of joint bank failure. The second part of this dissertation studies the connection between public finance and financial stability. Chapter 4 looks into the interaction between bank capital regulation and taxation and finds that banks trade off leverage risk against portfolio risk in response to a higher corporate income tax rates. Finally, Chapter 5 analyses banks’ excessive holdings of domestic government debt as one of the sources of the interrelatedness of public finance and bank stability. Two possible explanations of banks’ home bias are tested: voluntary government bond hoarding and government induced bond buying.

Suggested Citation

  • Horváth, Bálint, 2015. "Essays in financial stability and public policy," Other publications TiSEM 9e6a078e-4278-4438-8d2c-c, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiutis:9e6a078e-4278-4438-8d2c-cb151438e582
    Note: Dissertation
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    References listed on IDEAS

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    1. Wagner, Wolf, 2010. "Diversification at financial institutions and systemic crises," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 373-386, July.
    2. Harald Uhlig, 2014. "Sovereign Default Risk and Banks in a Monetary Union," German Economic Review, Verein für Socialpolitik, vol. 15(1), pages 23-41, February.
    3. Jeremy C. Stein, 2012. "Monetary Policy as Financial Stability Regulation," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 57-95.
    4. Uysal, Vahap B. & Kedia, Simi & Panchapagesan, Venkatesh, 2008. "Geography and acquirer returns," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 256-275, April.
    5. Slemrod, Joel, 2009. "Lessons for Tax Policy in the Great Recession," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(3), pages 387-397, September.
    6. Michael D. Bordo & Claudia Goldin & Eugene N. White, 1998. "The Defining Moment: The Great Depression and the American Economy in the Twentieth Century," NBER Books, National Bureau of Economic Research, Inc, number bord98-1, June.
    7. Wolf Wagner, 2011. "Systemic Liquidation Risk and the Diversity–Diversification Trade‐Off," Journal of Finance, American Finance Association, vol. 66(4), pages 1141-1175, August.
    8. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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