Preprintgreen2012

A Macroeconomic Model of Endogenous Systemic Risk Taking

51 citations0/0 files storedSSRN Electronic Journal

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Banking stability, regulation, efficiency Economic Theory and Policy Economic theories and models

Abstract

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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References

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Cited by

2017Dynamic Bank Capital Requirements 2014Melting Down: Systemic Financial Instability and the Macroeconomy 2013Ratio controls need reconsideration 2017The Disturbing Interaction between Countercyclical Capital Requirements and Systemic Risk 2020Macroprudential policy with capital buffers

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