Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088588 | Journal of Banking & Finance | 2015 | 12 Pages |
Abstract
This paper examines the role of macroprudential capital requirements in preventing inefficient credit booms in a model with reputational externalities. In our model, unprofitable banks have strong incentives to invest in risky assets when macroeconomic fundamentals are good in order to avoid the stigma of being assessed as low ability by the market. We show that across-the-system countercyclical capital requirements that deter such gambling are constrained optimal when fundamentals are neither extremely weak nor extremely strong.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
David Aikman, Benjamin Nelson, Misa Tanaka,