Capital Adequacy Requirements and Financial Frictions in a Neoclassical Growth Model

Miho Sunaga ()
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Miho Sunaga: Graduate School of Economics, Osaka University

No 17-21, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: I introduce nancial market friction into a neoclassical growth model. I consider a moral hazard problem between bankers and workers in the macroeconomic model. Using the model, this study analyzes how capital adequacy requirements for banks affect the economy. I show that strengthening capital adequacy requirements is desirable for an economy whose nancial market has not developed sufficiently. Regulatory authorities should pull up the minimum capital adequacy ratio in a country whose nancial market has not developed sufficiently. Moreover, there is no need to change the minimum cap- ital adequacy ratio in a country whose nancial market has developed sufficiently even if the economy experiences a recession.

Keywords: Capital adequacy requirements; Economic Growth; Financial Intermedi- aries; Macro-prudential policies (search for similar items in EconPapers)
JEL-codes: E44 G21 G28 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-07
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-dge, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1721

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