Central Bank Policy and the Concentration of Risk: Empirical Estimates

Helene Rey, Nuno Coimbra and Daisoon Kim

No 16221, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Before the 2008 crisis, the cross-sectional skewness of banks' leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks' risk-taking parameters from balance sheet data. The time series of these estimates allow us to understand systemic risk and its concentration in the banking sector over time. Counterfactual exercises show that (1) monetary policymakers confront the trade-off between stimulating the economy and financial stability, and (2) macroprudential policies can be effective tools to increase financial stability.

JEL-codes: E44 E52 E58 G21 G28 (search for similar items in EconPapers)
Date: 2021-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16221 (application/pdf)

Related works:
Journal Article: Central Bank Policy and the concentration of risk: Empirical estimates (2022)
Working Paper: Central Bank Policy and the Concentration of Risk: Empirical Estimates (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16221

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16221

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().