A Macroeconomic Model of Endogenous Systemic Risk Taking

Javier Suarez and David Martinez-Miera

No 9134, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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

Keywords: Capital requirements; Credit cycles; Financial crises; Macroprudential policies; Risk shifting; Systemic risk (search for similar items in EconPapers)
JEL-codes: E44 G21 G28 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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