The effects of macroprudential policy on imperfect banking competition

Matheus Anthony Melo

Macroeconomic Dynamics, 2026, vol. 30, -

Abstract: This paper studies the stabilization properties of time-varying capital requirements in an environment dominated by an oligopolistic banking sector, where banks accumulate capital subject to a leverage adequacy cost. The results indicate that macroprudential policy can stabilize fluctuations in business and credit cycles by controlling the loan rate, thereby influencing the spread within the banking system. A welfare analysis shows that the welfare gains from macroprudential policy depend on the type of shock hitting the economy, and that higher banking competition can amplify these benefits. The findings also highlight that time-varying capital requirements should not substitute for monetary policy, but rather complement it in addressing financial imbalances and adverse sectoral shocks.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
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:cup:macdyn:v:30:y:2026:i::p:-_13

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().