Macro Prudential Policies from a Micro Prudential Angle

The standard macro(prudential) 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 macro prudential stance.

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Bibliographic Details
Main Authors: Cordella, Tito, Pienknagura, Samuel
Language:English
en_US
Published: World Bank, Washington, DC 2013-12
Subjects:AGENCY PROBLEMS, BANK BAILOUTS, BANK DIRECTOR, BANK LIQUIDITY, BANK RISK, BANK RISK TAKING, BANK RISK-TAKING, BANKS, BORROWING, BUSINESS CYCLE, BUSINESS CYCLES, CAPITAL FLOWS, CAPITAL REGULATION, CAPITAL REQUIREMENT, CAPITAL REQUIREMENTS, CAPITAL STRUCTURE, COST OF CAPITAL, CREDIT INCREASES, DEBT, DEFAULT RISK, DEMAND CURVE, DEMAND DEPOSITS, DEMAND FOR CREDIT, DEPOSIT, DEPOSITORS, DEVELOPMENT BANK, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, ECONOMIC PERFORMANCE, ECONOMIC THEORY, EUROPEAN CENTRAL BANK, EXCESSIVE RISK, EXTERNAL LIABILITIES, EXTERNALITIES, EXTERNALITY, FINANCIAL CRISES, FINANCIAL FRAGILITY, FINANCIAL INNOVATION, FINANCIAL INTERMEDIATION, FINANCIAL REGULATION, FORM OF COLLATERAL, INSTRUMENT, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, LEVELS OF RISK, LEVERAGE, LEVY, LIABILITY, LIABILITY STRUCTURE, LIQUIDITY REQUIREMENTS, LIQUIDITY RISK, LOAN, MACROECONOMIC MODELS, MARKET POWER, MINIMUM CAPITAL REQUIREMENT, MINIMUM CAPITAL REQUIREMENTS, MONETARY POLICY, MORAL HAZARD, NEGATIVE EXTERNALITIES, OBLIGATIONS TO DEPOSITORS, POLITICAL ECONOMY, PORTFOLIO, PORTFOLIOS, PRUDENTIAL REGULATION, REGULATORY FRAMEWORK, RESERVE, RESERVE REQUIREMENTS, RETURNS, RISK CHOICES, RISK TAKING, RISK-TAKING INCENTIVES, SYSTEMIC RISK, TAX, TAX ON DEPOSITS, TAXATION, macroprudential regulation, microprudential regulation,
Online Access:http://documents.worldbank.org/curated/en/2013/12/18634314/macro-prudential-policies-micro-prudential-angle
https://hdl.handle.net/10986/16937
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