(Un)intended Consequences of Macroprudential Regulation

2021 ◽  
pp. 183-202
Author(s):  
Moran Ofir ◽  
Yevgeny Mugerman
Keyword(s):  
Macroprudential Regulation

scholarly journals GROWTH AND WELFARE EFFECTS OF MACROPRUDENTIAL REGULATION

2018 ◽  
Vol 23 (8) ◽  
pp. 3140-3162 ◽  
Author(s):  
Pierre-Richard Agénor
Keyword(s):  
Systemic Risk ◽  
Overlapping Generations ◽  
Welfare Effects ◽  
Financial Supervision ◽  
Overlapping Generations Model ◽  
Macroprudential Regulation ◽  
Bank Monitoring ◽  
Investment Projects ◽  
Optimal Monitoring ◽  
Reserve Ratio

This paper studies the growth and welfare effects of macroprudential regulation in an overlapping generations model of endogenous growth with banking and agency costs. Indivisible investment projects combine with informational imperfections to create a double moral hazard problem à la Holmström–Tirole and a role for bank monitoring. When the optimal monitoring intensity is endogenously determined, an increase in the required reserve ratio (motivated by systemic risk considerations) has conflicting effects on investment and growth. On one hand, requiring banks to put away a fraction of the deposits that they receive reduces the supply of loanable funds. On the other, a higher required ratio raises incentives to save and mitigates banks' incentives to monitor, thereby lowering monitoring costs and freeing up resources to increase lending. In addition, it may mitigate the systemic risk externality associated with excessive leverage. This trade-off can be internalized by choosing the required reserve ratio that maximizes growth and welfare. However, the risk of disintermediation means that in practice financial supervision may also need to be strengthened, and the perimeter of regulation broadened, if the optimal ratio is relatively high.

Systemic risk and macroprudential regulation

2015 ◽  
pp. 197-219 ◽  
Author(s):  
Franklin Allen ◽  
Elena Carletti
Keyword(s):  
Systemic Risk ◽  
Macroprudential Regulation

scholarly journals The Theoretical Framework of Macroprudential Policy and its Place in the Scheme of Economic Policy

2016 ◽  
Vol 1 (2) ◽  
pp. 22-31
Author(s):  
János Kálmán
Keyword(s):  
Economic Policy ◽  
Historical Context ◽  
Theoretical Framework ◽  
Economic Policies ◽  
Macroprudential Policy ◽  
Macroprudential Regulation ◽  
Regulation And Supervision ◽  
Systemic Risks ◽  
Basic Concepts ◽  
The Stability

Microprudential regulation and supervision – focused on institutional risks – cannot guarantee the stability of the financial system. Therefore special attention should be paid to macroprudential regulation and supervision to address systemic risks. The purpose of this study is to provide the historical context and a theoretical framework for macroprudential regulation and supervision – a new area of economic policy. To this end, we shall examine the causes for the spread of macroprudential policy, its basic concepts, and thirdly, its place within the scheme of economic policies.

scholarly journals Macroprudential regulation as part of the Mexican policy toolkit

2020 ◽  
Vol 16 (1) ◽  
pp. 1-27
Author(s):  
Carlos Alberto Zarazúa Juárez
Keyword(s):  
Banking System ◽  
Banking Regulation ◽  
Theoretical Framework ◽  
Capital Requirements ◽  
Bank Capital ◽  
Dsge Model ◽  
Macroprudential Regulation ◽  
Debt Level ◽  
Bank Capital Requirements

The objective of this work is to assess the effect of implementing countercyclical macroprudential regulation in Mexico with the objective of verify whether this type of policy is welfare-improving. Using a DSGE model, two kinds of macroprudential rules are tested: countercyclical bank capital requirements and countercyclical loan-to-value ratios. Results suggest that these rules are welfare-improving and avoid the formation of credit bubbles as well as facilitate loans in the presence of macroeconomic crises. Results suggest that the use of countercyclical rules is effective in keeping the debt level according to its long-term equilibrium. This paper presents a theoretical framework to analyze banking regulation for policy purposes and is the first attempt to analyze countercyclical regulation in Mexico using a microfounded model. Results can be used to rationalize the use of macroprudential tools during the COVID‑19 pandemic given the current interventions in the Mexican banking system.

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