Optimal Bank Regulation, the Real Sector, and the State of the Economy

Item Type Monograph (Discussion Paper)
Abstract Concerns about the procyclicality of bank regulation have motivated recent reforms that include countercyclical measures. This paper analyzes how optimal capital requirements, which balance a trade-off between financial stability and investment of the real sector, adjust during a downturn. Adding an endogenous loan market reveals equilibrium effects that strongly influence the adjustment and allows studying the implications of real shocks. The results suggest a nuanced adjustment depending on the shock: In a capital crunch, capital requirements are relaxed to prevent a sharp decline in investment. If productivity decreases, they are tightened as preserving financial stability entails a smaller cost.
Authors Kogler, Michael
Subjects economics
finance
HSG Profile Area SEPS - Economic Policy
Date August 2016
Depositing User Michael Kogler
Date Deposited 01 Sep 2016 15:09
Last Modified 20 Jul 2022 17:28
URI: https://www.alexandria.unisg.ch/publications/249136

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Kogler, Michael: Optimal Bank Regulation, the Real Sector, and the State of the Economy. 2016,

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https://www.alexandria.unisg.ch/id/eprint/249136
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