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Schumpeterian Banks: Credit Reallocation and Capital Requirements

Michael Kogler and Christian Keuschnigg

VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: Capital reallocation from unprofitable to profitable firms is a key source of productivity gain in an innovative economy. We present a model of credit reallocation and focus on the role of banks: Weakly capitalized banks hesitate to write off non-performing loans to avoid a violation of regulatory requirements. This results in insufficient credit reallocation across sectors and a distorted capital allocation. Reducing the cost of equity and tightening capital requirements can mitigate distortions.

JEL-codes: D92 G21 G28 G33 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban and nep-fdg
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Schumpeterian Banks: Credit Reallocation and Capital Requirements (2019) Downloads
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